D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y * S
C. (65) 116
29th J u l y ,
GOVERNMENT) COPY NO.
1965
CABINET
THE NATIONAL
PLAN
M e m o r a n d u m b y t h e F i r s t S e c r e t a r y of S t a t e a n d
S e c r e t a r y of S t a t e f o r E c o n o m i c A f f a i r s
I a t t a c h a l i s t of c h a p t e r h e a d i n g s a n d f o u r k e y c h a p t e r s of t h e
P l a n f o r d i s c u s s i o n a t a n e a r l y m e e t i n g of t h e C a b i n e t : Chapter
Chapter
Chapter
Chapter
1
7
15
18
The Plan in Outline
B a l a n c e of P a y m e n t s
T h e U s e of R e s o u r c e s
Public Expenditure
2.
A v i r t u a l l y c o m p l e t e d r a f t of t h e P l a n i s b e i n g c i r c u l a t e d
to the E c o n o m i c D e v e l o p m e n t (Official) C o m m i t t e e .
I should be grateful
if a n y M i n i s t e r w h o w i s h e s t o r a i s e a p o i n t o n a c h a p t e r o t h e r t h a n t h e
four c i r c u l a t e d h e r e w i t h would get in t o u c h with m e .
3.
The text and figures relating to Public Expenditure w e r e
p r e p a r e d o n t h e b a s i s of t h e p r o p o s a l s w h i c h t h e C h a n c e l l o r of t h e
E x c h e q u e r p u t t o t h e C a b i n e t (C. (65) 101).
4.
T h e N a t i o n a l E c o n o m i c D e v e l o p m e n t C o u n c i l (N, E . D . C. ) w i l l
b e d i s c u s s i n g a d r a f t of t h e P l a n o n 5 t h A u g u s t .
T h i s will omit
p a s s a g e s w h i c h d e p e n d on d e c i s i o n s y e t t o b e t a k e n .
Special precautions
a r e being taken to prevent d i s c l o s u r e .
!
5.
P a g e p r o o f s , r e v i s e d t o t a k e a c c o u n t of C a b i n e t s d i s c u s s i o n
and
of t h e c o m m e n t s of t h e N . E . D . C . w i l l b e a v a i l a b l e i n l a t e A u g u s t f o r
c i r c u l a t i o n to t h e E c o n o m i c D e v e l o p m e n t (Official) C o m m i t t e e a n d f o r
final c l e a r a n c e by M i n i s t e r s .
6.
It i s a t p r e s e n t i n t e n d e d t o p u b l i s h t h e P l a n o n 1 6 t h S e p t e m b e r ,
b u t i n v i e w of t h e s h o r t t e r m e c o n o m i c p o s i t i o n t h e d a t e of p u b l i c a t i o n
will h a v e to be kept flexible until the l a s t m o m e n t .
G. B .
D e p a r t m e n t of E c o n o m i c A f f a i r s ,
29th J u l y ,
1965
S. W . 1.
List of Contents SECTION I,. - ..JNTRjDMQTION 1.
The Plan in Outline. SECT ION. JLL - THE BASIS, DOR. GRC^TH 2.
Output; Productivity and the Demand for Labour.
3.
The Manpower Situation,
k.
Industrial Efficiency. 5.
Investment.
6.
Prices and Incomes.
7.
Balance of Payments.
8 .
Regional Planning SECTION III - INDUSTRIAL,, SECTORS 9.
Engineering and Allied Industries.
10.
The Construction Industries.
11.
Energy.
12.
Transport,
"13Ik.
Agriculture.
Other Industries. SECT I OiL.IV._r-JJSE. OP, RESOURCES 13.
The Use of Resources,
16,
Consumers' Expenditure.
17o
Housing.
18.
Public Expenditure, 19.
Defence..
20,
Health and Welfare Services, 21.
Education,
22.
Benefits and Assistance. APPJNDLCES A,
Regional Supply and Demand for Labour, B.
Regional Studies. Not yet complete. CHAPTER 1 THE PLAN IN OUTLINE
1.
This i s
growth.
a Plan to provide
An e s s e n t i a l
balance
part
for
of t h e P l a n i s
of p a y m e n t s p r o b l e m ;
faster
a solution
of p a y m e n t s .
to economic
have l e f t
Periodic
c r i s e s have l e d
e x p a n s i o n and p r o d u c t i v e
us vulnerable
t o fui^ther
balance
when e x p a n s i o n was r e s u m e d .
aim t o b r e a k
o u t of
maintain p o l i c i e s
more s u s t a i n e d
I n 1964 t h e
3,
vicious
which w i l l
economic
half
deficit
the
is s t i l l
to
of
It
checks
these in
turn
payments
is
the
Government's
and
t o enjoy more r a p i d
deficit
and
The G o v e r n m e n t h a s
and i t
an
taken a series
of
i s hoped t h a t
w i l l have been removed t h i s
imbalance
rose to
year.
t o be removed,
at
But
least
there
and t h e
i n c u r r e d i n 1964 and 1965 w i l l h a v e t o be r e p a i d
the
sharp
and t o i n t r o d u c e
of p a y m e n t s
the position,
a substantial
maintained
growth.
exceptionally high level.
to redress
circle
enable us
overall balance
measures
Britain's
from a weak
investment;
difficulties
this
to
world.
P o r t o o l o n g t h e U n i t e d Kingdom h a s s u f f e r e d
balance
economic
f o r growth, c a n n o t be
u n l e s s we p a y o u r way i n t h e
2.
the basis
debt
by t h e
end
of
decade.
4-.
The t a s k
the s u r p l u s
fostering
of c o r r e c t i n g
necessary
the balance
to repay
our debts,
t h e r a p i d g r o w t h of t h e
c h a l l e n g e we f a c e
i n economic
of p a y m e n t s and
economy,
while
is
at
the
achieving
t h e same
time
central
planning.
THE GROWTH TARGET
5.
The P l a n i s
national
output
designed
of p a s t
per head and a r e a l i s t i c
It
involves
output w e l l b e f o r e
between 1964 and
a 25 p e r
b e t w e e n 1964 and 1970.
chosen i n t h e l i g h t
them.
to achieve
trends
view of
the
1970 and an a n n u a l
-L o
1
objective
in national
achieving a 4 per
1970.
This
cent increase
scope for
cent
output
has
and
improving
in
been
output
upon
annual growth r a t e
average
of
3.8 p e r
cent
of
6.
The r a t e
the r a t e
of i n c r e a s e
of g r o w t h of
productivity);
in total
output
per head
and t h e r a t e
decade the labour
about
cent a year.
l i k e l y t o be much l e s s .
into
On p r e s e n t
7.
Even t h e n by f a r
to achieve
In the past
sharply
term c h a n g e s
growth
would
of
growth
to year,
largely
allowing
for
The r e q u i r e d
in the l i g h t
2-f p e r
cent
n o t come a b o u t w i t h o u t
a great
and w o r k e r s
efficiency,
to improve
economic p o l i c y w h i c h g i v e s
3-4
effort
has
priority
to
averaged
period
of a b o u t
3.4 per
as a
of
3
cent
but i t
on t h e p a r t
to t h i s
short­
over the
trends;
as well
per
fluctuations
a rate
acceleration
of p a s t
output
reflecting
these
a n d may now h a v e r e a c h e d
thus seems f e a s i b l e
in
p e r head seems t o h a v e
early 1950s,
0.4
target.
from y e a r
per c e n t p e r annum.
bring
the
on a v e r a g e b y a b o u t
of p r o d u c t i v i t y
cent in the
from I 9 6 0 t o 1 9 6 4 ,
part
increase
After
to
a r e now n o t
of
i n demand.
is
policies
the greater
?
average
come f r o m a n i n c r e a s e
t h e u n d e r l y i n g g r o w t h of o u t p u t
about 2 p e r
it
regional
the national
the rate
2t
by
of i n c r e a s e up t o n e a r l y
which w i l l have to r i s e
fluctuated
been i n c r e a s i n g
trends
Successful
output w i l l have t o
cent a y e a r
factors;
words
employment i n a r e a s where t h e r e
per c e n t a y e a r .
per h e a d ,
other
force has
enough j o b s m i g h t b r i n g t h e r a t e
increase in
(in
on t w o
B u t f r o m now on t h i s
0.25 p e r c e n t p e r annum.
more p e o p l e
depends
of g r o w t h of t h e l a b o u r f o r c e . '
Over t h e l a s t
0.7 per
output
will
management
Government
objective.
!
THE NATURE AND PURPOSE OF PLANNING
8.
Our e c o n o m y ,
mixed o n e .
l i k e most
The G o v e r n m e n t
is a large part
of
total
others
element
large
the b a s i c
the country
corporations;
the
of
power a n d i n f l u e n c e .
growth and n a t i o n a l
9.
All
to be,
this
It
is
this
carried
able
gives
intends
industry
the
to
public
reason
on b y
exercise
spending
part
of
public
authority
Government g r e a t
to use this
a
the
a large
to secure
and commerce i s ,
l a r g e l y g o v e r n e d by t h e m a r k e t
t h i s does n o t n e c e s s a r i l y
bring about
for
is
in
economic
faster
solvency.
Most m a n u f a c t u r i n g
continue
important.
stuns i n t a x a t i o n ;
Government i s
many o t h e r f i e l d s .
is
expenditure;
Government must r a i s e
industry
i n t h e modern world,
and w i t h o u t
active
and
will
economy.
Government
the r e s u l t s which the n a t i o n needs
- for
But
influence
example,
(
sufficient exports to pay for our imports and other overseas expenditure. Also, the forces of competition often operate too slowly. Then again, where productive units are large and investment decisions have to be taken two to five years ahead, competing companies tend to bunch their investment, holding back and moving forward together, producing surplus or over­
stretched resources. There is, too, little doubt that inadequacy of investment in British industry has resulted in increasing home demand being met by a greater flow of imports than the economy could afford. 10. Sometimes government action may be required to strengthen the forces of competition, for example by reinforcing the legislation against restrictive practices or providing for more disclosure in company accounts. In other cases, such as the regional distribution of industry, and transport, important social costs arise which are not expressed in market prices; and positive Government action is required to supplement market forces. Each case must be judged on its merits. The market economy will continue as a general background to all other policies and care will be taken not to destroy the complex mechanisms on which it is based. The end product of both co-operative planning and the market economy is an internationally competitive industry; and in securing this aim they complement each other. 11.
Both government and industry have to plan several years
ahead and it is desirable to co-ordinate the forward estimates
of both. Public expenditure cannot be planned realistically
without some idea of the rate at which the economy can be
expected to grow and of the size of other claims on resources,
for example for industrial investment. For this reason the
assembly of the forecasts and plans of private industry is a
great help in planning the public sector.. Similarly, indus­
trialists should benefit, both from the collection of the plans
of other industries which are their customers, and from a
knowledge of the intentions of Government, which is by far the
largest buyer in the country.
12.
Some of the forecasts or projections for particular
industries will inevitably turn out to be wrong. But this does
not mean that it is useless to make them. Many progressive
firms already look ahead in quantitative terms for up to five
years and sometimes more. The projections in the Plan are
essentially attempts by government and industry, working in
co-operation, to break down the global objective of a 25 per
cent growth rate into the implications for particular industries.
These projections should help firms and industries to take more
informed decisions than if they were left in the dark about
other people's intentions and beliefs.
13" Forecasts are also a useful control device. If an industry falls below projection it will be valuable to discover why. In some cases (e.g. if consumers' preferences have been wrongly forecast) no action by government may be indicated. But in other cases (e.g. if it is due to the failure of productivity to rise) it will serve as a useful warning signal for action by industry, by government, or by both In co-operation. THE INDUSTRIAL INQUIRY 14. The first stage in making a plan is to find out the facts,
not simply about the past but about future intentions, poten­
tialities and problems. This is the main purpose of the
industrial inquiry which has been carried out this year.
Building on the pioneering work of the National Economic
Development Council the inquiry has been extended to cover most
of the economy, both the public and the private sectors and the
production of both goods and services. Industries were asked
what 25 per cent national growth from 1964 to 1970 would mean
for them. The co-operation received has been excellent.
15. Perhaps the most encouraging result of the inquiry was in
the field of exports. The replies from industry suggested that
these could grow by about 5ir per cent a year in volume. This
is broadly the rate required to achieve our balance of payments
objectives (see Chapter 7 ) .
It is substantially faster than
the average of about 3 per cent a year over the past decade.
It is also substantially faster than the forecasts given to the
National Economic Development Council in its 1962 inquiry. The
replies from industry must be treated with caution, as
projections are particularly difficult in this field. However,
the changing geographical and commodity composition of our
exports makes it reasonable to expect a faster expansion in
1.4 future, as a growing proportion of our exports is now going to
the more rapidly expanding markets and is in the more rapidly
expanding lines; there has already been some acceleration in
the growth of exports in recent years. Some of the reasons
given by industries for expecting a further acceleration are
outlined in Chapter 7 (paragraphs
). The forecast
expansion of 5tf per cent a year should be attainable; world
trade in manufactures is expected to grow at a faster rate than
this over the Plan period. But the rate forecast will not come
about automatically. To obtain it important changes in
attitudes and policies are required, a point which was made
clear by the industries concerned.
16.
The inquiry suggested that national productivity (output
per head) could grow by 3 . 1 per cent a year
between 1 9 6 4 and 1 9 7 0 (see Chapter 2 ) . This is substantially
faster than the average growth over the past 1 0 - 1 5 years, but
less than the rate of 3 . 4 per cent required to achieve the
growth programme. In the light of past trends (see paragraph 7
above), it should be possible to improve on industry's forecast,
and to do substantially better given new policies to raise
industrial efficiency and economise manpower.
17.
Since the productivity increo.se forecast by the Industrial
Inquiry is not yet quite enough to achieve 25 per cent national
growth, there is an apparent "manpower gap", with the demand for
extra labour exceeding the additional labour likely to become
available, without changes in policies, by about 4 0 0 , 0 0 0 .
This
gap could be reduced to about 2 0 0 , 0 0 0 by successful regional
policies. No great significance can be attached to this precise
figure, given the difficulties of forecasting supply and demand
for labour five years ahead; and it is not large in relation
to a total labour force of over 25 million. But it is substantial
in relation to the growth of the labour force.
18.
The inquiry revealed the need for large movements of labour,
with three major sectors - agriculture, mining and inland
transport - requiring some 4 5 0 , 0 0 0 less workers; other
industries, including aircraft, railway rolling stock, clothing
and footwear, 2 0 0 , 0 0 0 less; while other sectors were estimated
to require an extra 1,450:, 0 0 0 workers, the major claimants being
mechanical and electrical engineering, construction, public
administration,
health,
e d u c a t i o n and o t h e r
services.
h a v e b e e n l a r g e m o v e m e n t s of l a b o u r i n t h e p a s t .
t o t a l manpower g o i n g up v e r y
is particularly
it
important
this redeployment
But
slowly in the next
five
to get labour redeployed
can be s p a r e d t o where i t
i s needed.
It
s h o u l d be p l a n n e d s o f a r
is
There
with
years
from
it
where
important
as p o s s i b l e
that
in
advance.
19.
The i n v e s t m e n t
p l a n n e d by m a n u f a c t u r i n g
Industry
as a whole
seems t o b e on t h e l o w s i d e f o r
t h e growth programme
(see
Chapter 5 ) .
investment
raised,
there is
Unless,
a danger
therefore,
of i n s u f f i c i e n t
and m a n p o w e r s h o r t a g e s ,
increases
as w e l l as
Import
by t h e E c o n o m i c D e v e l o p m e n t C o m m i t t e e s
insufficient
Office
capacity,
has l e d t o l a r g e
demand h a s i n c r e a s e d
chemicals,
bearings for
20.
substantially
being t a c k l e d ,
the
examples
machine
are
tools,
A rapid
industries
industry
British chemical plant
is being j o i n t l y
concerned.
indication
of t h e f u t u r e
shortages.
our n e e d s
for
the
problems
in
for
also
productive
in
to play
in
for
in the chemical
and c o n s t r u c t o r s ;
Specific
example
This w i l l help
various
the
industry
this
on
matter
Development
Then a g a i n t h e i n q u i r y h a s g i v e n
demand f o r
a
required
role
field,
Economic
are
later
trade balance.
In t h i s
investment
examined by t h e
areas
i n d u s t r y where
which have a major
producers
Committees
specific
these
expansion is
and i m p r o v i n g the
i m p a c t of r a p i d l y r i s i n g
Economic
are described
t o meet
problems have a l s o b e e n r e v e a l e d
Industrial
when
The w a y s i n w h i c h t h e y
construction
growth i s r e q u i r e d
the e n g i n e e r i n g
of l i k e l y
which
capacity,
of m a n u f a c t u r e s
To e a c h of
i n d u s t r y by i n d u s t r y ,
investment,
modernising
t h e way i n
to pin-point
an o p p o r t u n i t y .
One e x a m p l e i s
and s o c i a l
out
National
t h a t h a v e t o be r e s o l v e d
t o be a c h i e v e d .
corresponds
substantial
to
carried
labour-saving
cement,
Committees have h e l p e d
growth programme
chapters.
out
I n q u i r y a n d t h e w o r k of t h e
of s t r a i n a n d t h e p r o b l e m s
there
studies
in the past;
steel,
capacity
vehicles.
The I n d u s t r i a l
Development
have brought
in imports
p a p e r and b o a r d ,
productivity
a n d by t h e
or i n s u f f i c i e n t l y
increases
in
of i n s u f f i c i e n t
export and t o compete w i t h i m p o r t s .
Economic D e v e l o p m e n t
plans are
types
to guide
of
some
skills
t h e w o r k of
T r a i n i n g Boards and t h e Government T r a i n i n g
and
the
Centres.
THE ACTION PaOGiiAtviME 21. The main problems that must he solved if we are to get more rapid and sustained growth have been described in the preceding paragraphs. The major ones - and they are clearly interrelated - are to restore the balance of payments to a sound position, to increase industrial efficiency and to close the manpower gap - by economies in the use of labour, through productive investment and in other ways, and by using more fully the labour reserves in the less prosperous regions. The programme of action to these ends is set out below. I.
Government overseas spending 22. The whole burden of correcting the balance of payments cannot be borne by British industry alone. The Government intends to stop the increase in defence expenditure and will pay particular attention to net expenditure overseas which has been growing rapidly. A start has been made with the recent agreement with Germany on the "offsetting of our expenditure there. The Government' s defence policy will be described in more detail when the Defence Review now in preparation is completed. 23. Cur aid to developing countries lias been rising at an average of about 10 per cent a year in recent years. The Government recognises the importance of the flow of aid from developed to developing countries in helping to stimulate the growth of the latter and thus to alleviate the serious poverty from which many of them suffer- It is fully aware of the part which our own programme lias to play in this international effort. But the amount of aid we give must be subject to restraint while our balance of payments difficulties persist, and we have to plan our aid so that the foreign exchange cost of the programme is kept to a minimum. II.
24.
As a r e s u l t
private
Private
of c a p i t a l
investments
investment
exports
direct
investments.
balance
than
securities
of
payments
and p r o s p e c t i v e
the balance
deterioration
necessary
of p a y m e n t s
in our l i q u i d
t o make a v e r y l a r g e
over a s h o r t p e r i o d ,
rate
otherwise
reduction
i n home demand s e v e r a l
investment
may h a v e
foregone.
Some l o s s
t o be s a c r i f i c e d
immediate
times
reduce very
that
of f u t u r e
in the i n t e r e s t s
of
capital
would
be
by a. s e v e r e
foreign
abroad
of r e d r e s s i n g
circumstances
substantially
is
t h e Government h a s
the net
£150 m i l l i o n
estimated
that
outflow
a year whilst
exchange
of
still
the balance
combined
tax
effects
the a t t r a c t i o n s
of v a r i o u s
of i n v e s t m e n t
investment
the
development
in this
the
country.
and h a s u n d e r t a k e n
of t h e s e m e a s u r e s
III.
on t h e
The G o v e r n m e n t h a s b e e n
of t h e w h o l e f i e l d
ensure
of p u b l i c
that
total
means and t h e p a t t e r n
i n a way t h a t
should
of a b o u t £ 2 , 4 0 0 m i l l i o n
term
about
investments
and
further
the
diminish
encourage
The' G o v e r n m e n t
recognises,
con p l a y I n
overseas
impact
countries.
spending
engaged i n a thoroughgoing
review
expenditure,,
been
encourage
Budget t o £ 2 , 0 0 0 m i l l i o n
save
and a l s o
of G o v e r n m e n t
planned
the
long
to keep under review the
than impede
to limit
a t 1964 p r i c e s ,
1,8
for
is within
spending has been
rather
decision
planned
Changes have
expenditure
of G o v e r n m e n t
In p a r t i c u l a r ,
to
of p a y m e n t s ;
investment
developing
Re--allocation
steps
measures
direct
changes w i l l
overseas
p a r t which p r i v a t e
control
permitting
which b r i n g a r a p i d g a i n t o
taken
private
i n t h e b u d g e t and i n J u l y 1965 w i l l
effort.
it
a
is
i n c o m e from
announced
made t o
exports
without
the
of t h e
It
26.
that
on i m p o r t s
capital.
however,
of
situation.
In these
foreign
total
in the balance
s h o u l d make a c o n t r i b u t i o n ;
indirectly
the
When i t
reasonable
to avoid
to
could support
is
operating
it
our
million
of c a p i t a l
position.
of
million,
and £ 6 , 0 0 0
strength
improvement
difficult
25.
to about £10,000
These a r e a s o u r c e
But t h e r e c e n t
was g r e a t e r
account
the value
of p a y m e n t s and t h e y b r i n g i n a m o u n t i n g
earnings.
serious
in the past,
abroad has r i s e n
including £4,000 million portfolio
abroad
the
the
our
rearranged
productive
Defence
compared w i t h the
1 9 6 9 - 7 0 when t h e
figure
Government
/9
took o f f i c e ,
will
and e n g i n e e r i n g
investment.
aircraft
sector
years
release
capacity
scarce high quality
for
The c h a n g e s a l r e a d y
of r e s o u r c e s
defence;
import-saving
decided upon i n
programme s h o u l d r e l i e v e
by r e l e a s i n g u p w a r d s
pressure
bat
cost for
a number
defence.
involve
of y e a r s .
military
engineering
over the next
rate
increase
a significant
About t w o - f i f t h s
expenditure
The d i v e r s i o n
to the
domestic
t h a t would o t h e r w i s e have been devoted
this will not
and d e v e l o p m e n t
manpower
and
the
on t h e
of £ 1 , 2 0 0 m i l l i o n
t h e r e h a s b e e n some c o n s e q u e n t
aircraft
tially
exports,
technical
in
to
this
civil
country
and t h u s
to
in imports
foreign
of a l l
research
contribute
to
of
exchange
has been devoted
use should
of i n n o v a t i o n
ten
to
substan­
the balance
of
payments.
27.
In determining
generally,
assist
the p a t t e r n
emphasis w i l l
economic growth,
of m o d e r n t e c h n o l o g y
facilities
at
to where i t
is
I V .
28.
all
levels
29.
e x a m p l e by s p e e d i n g
been attempted
of d e t a i l e d
and t h e
Economic D e v e l o p m e n t
cover each major
L 3^7 P
has i t s
cent
by t h e e n d o f
private
assessment
separate
of
manpower
of
are therefore
into
Committees
be c o v e r e d .
the Department
A new M i n i s t r y
1 . 9
than
industry
purpose
and
and t h e
of
problems.
represen­
National
extended
to
have a major
Committees
industry
role
covering
and
commerce.
c o v e r i n g £ 5,1/ p e r c e n t ,
i s hoped t h a t
people with experience
industry,
policy
of t h e n e e d s
being
and w i l l
employment i n p r i v a t e
the year i t
For t h i s
features
the Government
g r o u p of i n d u s t r y ,
employment w i l l
has r e c r u i t e d
of s e n i o r
transfer
training
Committees, which include
unions,
Office,
T h e r e a r e now f o u r t e e n
of p r i v a t e
application
co-operation with
I n O c t o b e r 1964- t h e r e w e r e n i n e
r
directly
by i m p r o v i n g
trade balance.
e n o u g h t o make a g l o b a l
of m a n a g e m e n t ,
e
the
p u r s u i n g a much m o r e a c t i v e
Each i n d u s t r y
to play.
industry,
and by e a s i n g t h e
The E c o n o m i c D e v e l o p m e n t
tatives
on t h o s e f o r m s w h i c h
needed,
to improve e f f i c i e n c y
industry.
for
in British
The G o v e r n m e n t i s
is not
be l a i d
expenditure
I n d u s t r i a l p o l i c y to^improve e f f i c i e n c y
a n d t h e b a l a n c e of p a y m e n t s has h i t h e r t o
it
of g o v e r n m e n t
about
P
In a d d i t i o n
the
of E c o n o m i c A f f a i r s
in responsible
Government
a
positions
of T e c h n o l o g y h a s a l s o
and
cent
e r
staff
in
been
/
1
0
s e t up t o
co-ordinate
technological
advance throughout
paragraphs
30.
the machinery
industry
(see
to
accelerate
4,
Chapter
).
The m o s t
though t h i s
immediate
is
efficiency
31 -
and s t r e n g t h e n
closely
task, i s
related
to improve
the trade
to the improvement
balance,
of
industrial
generally.
Import
saving.
Committees i s
The w o r k o f
already beginning
t h e Economic
Development
to produce r e s u l t s .
For
example,
t h e Machine Tool Economic Development Committee h a s a g r e e d
2 4 - p o i n t A c t i o n Programme t o i m p r o v e t h e
The C h e m i c a l s E c o n o m i c D e v e l o p m e n t
manufacture
of
products
which would r e d u c e
The M e c h a n i c a l
not at
the import
Committee h a s
p r e s e n t made i n
action
suppliers.,
and so a v o i d u n n e c e s s a r y
of w h a t i s
available
paragraphs
in
lower cost
-
of e f f o r t ,
to have produced
equipment
for
countries.
the
short
pattern
of
of
industry.
But i t
is
success
advantage
and t h e i r
themselves
Ex-port p r o m o t i o n .
are available
been c a r r i e d
to help
out
and to
exporters
the Export Rebate
credit
other
effort
have
the
and
b y many
companies
material
of g o v e r n m e n t
services
campaign
has
The G o v e r n m e n t
speed up t h e
scheme, whereby
SECRET use
customers.
insurance
1.10
to
standardisation
the very
t o make t h e m b e t t e r k n o w n ,
expanded
diversification
Committees
and a p u b l i c i t y
to
British
examine u r g e n t l y
in
at
and
t h a n i n many
a major
A A^ery w i d e r a n g e
a n n o u n c e d new m e a s u r e s
These i n c l u d e d
of
a t a s k w h i c h many
have t a c k l e d w i t h g r e a t
of
to
quick progress
This would i n v o l v e
- and
existing
the
The E c o n o m i c D e v e l o p m e n t
and problems
reduction.
with
of
degree
jobbing runs
prospects
cost;
and
4,
export
and w i l l i n g n e s s
been asked where a p p r o p r i a t e
already
is
ignorance
standardisation
a greater
of p r o d u c t
for
quickly,
therefore
33.
through
production
through greater
proliferation
industrial
sections
year.
Committee
(See Chapter
fairly
I n many i n d u s t r i e s
seems
variety
a
between buyers
imports
country,
Additional
and manpower,
expensive
consultation
could be o b t a i n e d
longer runs.
market
country
).
Standardisation.
equipment
this
suggested
this
E n g i n e e r i n g Economic Development
to improve
balance.
b y some £ 3 0 m i l l i o n
bill
initiating
32.
export/import
a
g r o w t h of
facilities
certain
ait
has
exports.
reduced
indirect
taxes
bearing upon e x p o r t s
new e x p o r t e r s
are refunded"
to receive help
Government f i n a n c i a l
market r e s e a r c h ;
overseas
trade
establishment
extension
fairs
of
of
and o t h e r
of t h e t r a d e
the
Chembers
measures by w h i c h a n e a r l y
for
support
trading
manufacturers
National
of
these
Committees
example,
by fund
overseas
increase
shortage
can be r e s o l v e d
through t h e i r
in t h e i r
sales
domestic
customers
fear
in
is
Concerted
of
to domestic
Q u i c k e r m o v e m e n t of
experts
compete
dramatically
reduce
co-ordinated
change a l l
times.
the
d o c k s and by t h e
Economic D e v e l o p m e n t
Committee
suppliers.
Their
the users
task is
to
it
action.
is
hoped
o r by
an
better
could
increase
term l o s s
handling in
of
the
of
ship
of
of a i r
- by
transport
The
set
special
of
the
and a l l
services
the
National
t h e Movement
agree urgently
freight,
industry
to
up a
Exports
on p l a n s
­
because
require
route
therefore
a year
could
This w i l l
transit
for
to us
Greater use
ship-owners.
Council has
together
examine
arrangements
that
long
by r o a d a n d r a i l
Economic D e v e l o p m e n t
which b r i n g s
companies
now c l o s e d
times.
along
in p a c k i n g and r o u t e i n g ,
c a n make
investment
Paster
of n e w t y p e s
transit
to
- now a b o u t £ 1 , 7 0 0 m i l l i o n
on d e l i v e r y
and
British
competitors.
exports.
to Europe
of c o n t a i n e r i s a t i o n ,
by t h e
from
own m a r k e t i n g
factor,
in the
could open u p i m p o r t a n t new m a r k e t s
ports,
establishment
a c t i o n by i n d u s t r i e s
individual
abroad might r e s u l t
new
exports
by c o - o p e r a t i v e
a limiting
by a d d i t i o n a l
capacity.
help t o remove t h e
the
their
t o buy as p r i n c i p a l s
exports
a specific
we c a n n o t
by
and by t h e
to s e c u r e
movement c f
in
The C o m m i t t e e s h a v e a l s o b e e n a s k e d
u s e of e x i s t i n g
work
to consider
raising
promotion,
corporations
Where a n i m m e d i a t e
direct
Export
increase
industries
35.
The
Commerce a n d
ways i n w h i c h t h e w h o l e o f t h e i r
that t h i s
Export
c o m p l e m e n t e d by t h e
and s u b s t a n t i a l
export
and s e l l
organisations.
the
Committees.
The G o v e r n m e n t h a s a s k e d
of e x p o r t
for
the
and
and t h e B r i t i s h N a t i o n a l
associations,
collective
and s u p p o r t
of A r e a C o m m i t t e e s .
being
to
and
activities;
the British
are
could be a c h i e v e d :
in
enabling
exporters;
Council;
exports
Economic D e v e l o p m e n t
for
trade missions
promotional
of
establishment
t h e Government
industries
for
participation
the a c t i v i t i e s
Council t o promote
34.
established
of a Commonwealth E x p e r t
Council by t h e
efforts
from
assistance
increased
arrangements
for
the
speeding u p e x p o r t
36.
traffic.
Rationalisation.
small s i z e
British
of many o f i t s
in t h e U n i t e d
States
industry
production units
a n d some o t h e r
lowering of i n t e r n a t i o n a l
tariffs
a n d E. P . T . A .
competition.
British
not o n l y f a c e b u t
The s c a l e
competitive
survival
t h r o u g h G-.A.T.T.
of
operations
and t h i s
on g e t t i n g r i d
is
comprised.
of r e s t r i c t i v e
negotiations
of
size
so t h a t
this
While the
and i n t e r n a t i o n a l
British i n d u s t r y .
Where t h e Government
promotion of t h e s e
desirable
so and i n some i n s t a n c e s
in b r i n g i n g t h e m
37.
Public
contribution
intelligent
to the
to use their
of g o v e r n m e n t
local
of t h e
of
the
to
do
initiative
the E l e c t r i c a l
to
and promote
38.
co-operation.
Development C o m m i t t e e s i s
i
the
appointed
Engineering
of
implement
The E c o n o m i c
other
the
a
indus­
t h e work
of
Development
Industries
Council,
has
and work
on t h e b e s t w a y s o f
to lower i n d u s t r i a l
standardisation
important
For example
on t h e u s e
discussions with the E l e c t r i c i t y
public p r o c u r e m e n t
buyers
and by a d v i s i n g
Government h a s
is g o i n g f o r w a r d w i t h i n g o v e r n m e n t ,
the
are large
economy t h r o u g h
contracts
authorities
B u i l d i n g Agency.
Industrial
the
to
promote
ready
c a n t h u s make a n
t r i a l i s e d b u i l d i n g m e t h o d s and t o h e l p
initiated
in
including
A s t a r t h a s been made.
to advise
Committee f o r
take
authorities,
Government
Ministry of H o u s i n g and l o c a l
the N a t i o n a l
abuse
new
v/ould
they are
authorities,
and l o c a l
efficiency
public a u t h o r i t i e s .
specialist
the
have t a k e n powers
can a s s i s t
developments
Public
of g o o d s .
use
intent
about.
industries
of many t y p e s
which
competitiveness
t h e y may w i s h t o
purchasing.
nationalised
of
and p r e v e n t i n g
t h e y would n o t i n t e n d
efficiency
a very
Government a r e
and t h e r e f o r e
can
to
the units
powers.to h i n d e r m e r g e r s which they were s a t i s f i e d
the g r e a t e r
it
competitive
to involve
of
such
international
is very important
practices
of m o n o p o l y p o w e r i n i n d u s t r y
investigate mergers,
of
seems l i k e l y
of t h e
The
economic groupings
advantage
the
those
countries.
i n d u s t r y must be o r g a n i s e d
considerable r e o r g a n i s a t i o n
British i n d u s t r y
compared w i t h
means t h e i n t e n s i f i c a t i o n
take positive
situation.
t h e p r o b l e m of
competing
such a s t h e K e n n e d y R o u n d a n d t h r o u g h
as E . C E .
faces
costs,
using
increase
exports.
One of t h e
to set
tasks
of t h e
standards within
their
Economic
industry
by i n t e r f i r m
who f i n d
and i n t e r n a t i o n a l
themselves
measurement a r e
of
help in
standard
g i v e n t h e h e l p and i n f o r m a t i o n
standards.
The b e n e f i t s
n i n e Economic Development
an o u t s t a n d i n g
tackling
spirit
the mutual problems
to
of
an
out in
Committees
of c o - o p e r a t i o n
those
of
they need
information have already been borne
w o r k of t h e f i r s t
there is
and t o s e e t h a t
b e h i n d by a n y p a r t i c u l a r
b r i n g t h e m s e l v e s up t o t h o s e
interchange
comparisons
the
where
and r e a d i n e s s
and o p p o r t u n i t i e s
of
to
the
industry.
39.
I n d u s ^ t r i a l management.
the most i m p o r t a n t
the q u a l i t y
interest
of
factor
industrial
The m o s t i n t a n g i b l e
in improving i n d u s t r i a l
management.
i n management e d u c a t i o n ,
n e x t few y e a r s
education
the increased
and i t
quantity
is
already providing
work a n d w i l l
continue
The G o v e r n m e n t w i l l
to
also
i n d u s t r i a l management.
in Chapter 4,
support
for
encourage
the
capacity
replacement,
manufacturing
planning.
a great
have
greater
this year,
are
further
and i t
additional
larger
doubtful
could b e a r such a l o a d ,
import-replacement.
manufacturing
41.
that i t
is necessary
import­
in
is
now
increase
a year
in
J u d g i n g by
in
real
experience
b e t w e e n 1 9 6 4 a n d 1 9 6 5 may b e
1966 i s more
whether
Nevertheless
of i n v e s t m e n t
to
and
investment
cent
the
it
is
uncertain.
unlikely
to
engineering
increased
important
to
be
industries
exports
and
maintain
yee.r.
The G o v e r n m e n t h a s b e e n s t u d y i n g t h e
system
and
than industry
given the need f o r
investment next
present
discussed
exports
an a v e r a g e
7 per
The o u t l o o k f o r
is
it.
investment
The p r o b a b l e g r o w t h b e t w e e n 1 9 6 4 a n d 1 9 6 5 i s
repeated;
this
of
Chapter 5).
the increase
than t h i s .
of
the p r o f e s s i o n a l i s a t i o n
t o be a l a r g e
of a b o u t
terms from 1964 t o 1970 ( s e e
so f a r
for
- probably
investment
deal
The
in
The P l a n s h o w s t h e n e e d f o r
manufacturing
management
/£"30-36/\
required
industry
the
interest
Manufacturing
there will
growing
that,in
of
To a c h i e v e t h e g r o w t h o f p r o d u c t i v i t y we n e e d ,
provide
is
contribution.
a c l o s e and a c t i v e
These q u e s t i o n s
paragraphs
V.
take
i s now a
and q u a l i t y
far
efficiency
expected
of a l l k i n d s w i l l b e m a k i n g a r e a l
Government i s
40.
There
and y e t by
allowances.
to provide better
and p r o p o s e t o i n t r o d u c e m e a s u r e s
effectiveness
They h a v e
incentives
to this
end.
to
of
the
concluded
investment
42.
It
is
also
businesses
important
that,
i n making investment
s h o u l d n o t be u n d u l y i n f l u e n c e d
fluctuations
and u n c e r t a i n t i e s .
by
The E c o n o m i c
decisions,
temporary
Development
Committees h a v e an i m p o r t a n t r o l e
to play in focussing
attention
on d e m a n d t w o y e a r s
ahead,
of
industries
including
being s u p p l i e d
and f i r m s
demand i n
export markets
by i m p o r t s ,
manpower o v e r t h e r e s t
more l a b o u r - s a v i n g
of
the
and more
and i n m a r k e t s
and on t h e g r o w i n g s h o r t a g e
the
investment
decade which w i l l
if
firms
are
to
now
of
necessitate
continue
their
expansion.
43.
New p r o d u c t i v e
i n v e s t m e n t by f o r e i g n
in under-employed areas
p l a y an i m p o r t a n t
investment.
of t h e U n i t e d Kingdom,
part
in the
creation
A special
effort
will
companies whose e x p o r t s
continue,
acquisition
of
control
VI.
44.
of
The m e a s u r e s a l r e a d y
to s t a r t
a faster
g r o w t h of p r o d u c t i v i t y
generally.
kinds i s
of
also
of
great
be made t o t h e b a l a n c e
standards
- by a s u c c e s s f u l
policy i s
very great
cumulative,
for
that
comprehensive
strategy within
economic p l a n ,
and w i t h f u l l
the
for
the balance
This w i l l
- and a l s o
of
our
in
be h e l p e d
by
efficiency
of
all
The c o n t r i b u t i o n
that
can
to
our
living
prices
and
incomes
the favourable
effect
only as a long term
framework
agreement
can a p o l i c y
g r o w t h of m o n e y i n c o m e s h o p e t o
been r e a c h e d ,
policy
is
year.
The G o v e r n m e n t b e l i e v e s
management and u n i o n s ,
the
than in the past
and s u s t a i n e d
indeed;
year after
of
of g r o w t h of money i n c o m e s
of p a y m e n t s
a
companies.
and i n d u s t r i a l
importance.
them
production.
the problem u n l e s s
our c o m p e t i t o r s .
But t h e r a t e
local
to improve
of p r o d u c t i o n move m o r e f a v o u r a b l y
to those
those
secured
and incomes
solve
to
industrial
t o be r e g u l a t i o n
described
by t h e m s e l v e s
continue
b e made t o a t t r a c t
prices
relation
45.
of new
existing British
Productivity,
payments c a n n o t
costs
of c o u r s e ,
especially
will
to B r i t a i n have a l r e a d y
firm base i n t h e B r i t i s h m a r k e t ,
There w i l l
companies,
the f i r s t
the
national
and c o - o p e r a t i o n
for
succeed.
time in
of
and
this
stable
prices
and
Agreement has
country,
on
of
the
in
planned
fact
?
objectives,
the machinery
and t h e s e a r e
46.
described
The p o l i c y
e v e n t s i n 1965 i s
the
limited
chances
VI^47,
It
is
clear
on h e r
well below t h e i r
or
place
An
to
encouraging
o p p o r t u n i t y ^7
policy
skill
going
a n d t h a t we
training
The I n d u s t r i a l
skills
time
influencing
in the world i s
inadequate
capacities.
take
existing
latest
labour market
technological
to have people with
will
a r e good.
examples a t
that Britain's
rely increasingly
afford
An a c t i v e
policy,
the scope for
decisions
of s u c c e s s
/"insert
such a
While i t
and w h i l e
by p a s t
for
6.
operation.
attitudes,
s t a r t h a s b e e n made,
criteria
in Chapter
i s how i n
change t r a d i t i o n a l
commitments,
and t h e
2 2 1^
cannot
and s k i l l
Inquiry
the r a p i d l y
g r o w i n g demand f o r
of many t y p e s
danger t h a t
g r o w t h w i l l be h e l d b a c k by s h o r t a g e s
to
working
revealed
and
of
the
these
skills.
48.
The I n d u s t r i a l
Inquiry
also revealed
movements o f l a b o u r b e t w e e n i n d u s t r i e s .
the need for
There w i l l
large
in
addition
be s u b s t a n t i a l m o v e m e n t s b e t w e e n f i r m s w i t h i n i n d u s t r i e s ;
i f we a r e t o h a v e t h e f a s t e r
growth which i s
w i t h new m e t h o d s a n d n e w p l a n t ,
rapidly
changing methods
to a s s i s t
those
affected
p o s s i b l e t h e y g a i n from
49.
For t h e s e r e a s o n s
o n e of t h e
of work.
compensation,
Training Boards,
move.
The G o v e r n m e n t a l s o
The p r o g r e s s
continuous
required,
intends
be more
measures
so f a r
as
e m b a r k e d on a w h o l e
the
3.
i n Chapter
development
extension
of
Government
Exchange
to help workers
to introduce
of
on
the
a system
of
benefits.
the
training will
period
be k e p t
measures
The G o v e r n m e n t ,
the
it
level
as a r e n e c e s s a r y w i l l
t h e Economic Development
1.15 under
of t h e P l a n a n d i f
the present measures are not producing
then such f u r t h e r
put i n h a n d .
for
that
i n t h e Employment
of i n d u s t r i a l
review during
appears t h a t
calls
described
other measures
w a g e - r e l a t e d unemployment
50,
are
a further
improvements
and v a r i o u s
symptoms w i l l
this
t h e Government has
They c o v e r r e d u n d a n c y
services
feasible
it.
and t h e s e
training centres,
technically
by c h a n g e and t o s e e
r a n g e of new p o l i c i e s
Industrial
All
and
be
Committees,
the I n d u s t r i a l
Boards w i l l
T r a i n i n g Boards and t h e R e g i o n a l
co-operate
on t h e a v a i l a b i l i t y
w i l l be used
considering
in. a s s e m b l i n g
of a n d n e e d s
to assess
the
for
comprehensive
skilled
training needs,
establishment
to guide
of new p l a n t s
in
and t o h e l p an e f f i c i e n t
ideal
t h a t w i t h any r e d u n d a n c y n o t i f i c a t i o n
s h o u l d a l s o be a n o t i f i c a t i o n
51.
These measures
should
"over-manning"
in industry.
possibility
substantial
of
capacity
and l a b o u r
labour.
In the Joint
Prices
encourage a wholesale attack
on
The I n d u s t r i a l
increases
in
output,
of I n t e n t
on
more r i g o r o u s
important
have r e c e n t l y
t h i s way;
unions,
their
made.
and t o s t r i v e
standards
firms,
of p e r f o r m a n c e
with the
achieved remarkable
and a r e
confident
B u t a much g r e a t e r
incomes,
part
to get rid
An e s s e n t i a l
the f u l l e r
use
the country.
the t a r g e t
of r e s t r i c t i v e
condition
for
The e m p l o y m e n t
to
3).
closing the
a more e v e n s p r e a d
pace i n d r i v i n g up c o s t s
unused r e s o u r c e s
for
Several
employees,
productivity
improvements
by a l l
productivity,
practices
of a l l
the fulfilment
in
the
in
can
be
concerned,
prices
and
kinds.
"manpower g a p " .
throughout
excess
regions
is
of
2 0 0 , 0 0 0 by 1970
T h i s w i l l make a
of
of t h e P l a n
prosperous
and p r i c e s w h i l e
elsewhere.
in
required
of a n e x t r a
pockets
levels.
of
Policy
of e m p l o y m e n t
help to avoid r e g i o n a l
the
the adoption
all
their
i n agreement with
large
of manpower i n t h e l e s s
(see Chapter
contribution
is
Regional
on
of
of w o r k i n g a r r a n g e m e n t s
of t h e p o l i c y
Till,
representatives
of t h e i r
have,
that
effort
at
of
Productivity,
attack
for
the
existing
on b e h a l f
increases
undertaken a major review
as an e s s e n t i a l
52.
co-operation
a n d a n u m b e r of o t h e r s
plants
with
s i g n e d o n 16 D e c e m b e r 1 9 6 4 ?
a sustained
him.
Inquiry revealed
through b e t t e r u t i l i s a t i o n
Statement
efficiency,
The
to
members t o e n c o u r a g e a n d l e a d
to
of l a b o u r .
to a worker
of t h e n e w j o b s
of m a n a g e m e n t a n d u n i o n s p l e d g e d t h e m s e l v e s
obstacles
various
available
forces,
and I n c o m e s ,
This
companies
the
redeployment
and
information
labour.
regions,
is
Councils
is
substantial
At t h e
same
the country
demand s e t t i n g
there are
time
will
the
still
53.
Regional
policies nust
of s e l f - s u s t a i n i n g
at present
are
industry,
of t h e
y e a r s and t r e b l e
century;
on t h e r o a d s w i l l
i n the next
the more i m p o r t a n t
South
for
the f i r s t
country
(see
authorities,
of t h e n a t i o n a l
time
forecasts
double i n
the next
that
ten
T h i s w i l l make
effects
of t h e M i d l a n d s and
assumptions,
demand f o r
Chapter 8 )
it
of
the
of t h e r e g i o n s
ahead,
population
changes and
looking w e l l beyond 1970,
of p o p u l a t i o n
is
expected
growth and w e l l
government,
with each
are
down
various
of t h e
supply
and
A special
review
is
to provide the
the r e s t
to national
the
of t h e
basis
large
century
economic
together with the Regional
t h a t have been s e t u p ,
together with detailed
plans t h a t
public
being.
The c e n t r a l
and Boards
of
r e q u i r e d now i f
during
t o make t h e maximum c o n t r i b u t i o n
on
collected
this
have been broken
regions.
planning that
of
programmes
have been made,
in. t h e v a r i o u s
of t h e p e r s p e c t i v e
expansion
years
forecasts
of f u t u r e
a l s o b e i n g made,
i n f o r m a t i o n has been
The b u i l d i n g
3
looking five
labour
plan,
on many a s p e c t s
on a r e g i o n a l b a s i s ;
56.
of a g r o w i n g
East.
As p a r t
55.
of
has been estimated
the harmful
in parts
longer
g r o w b y 17 m i l l i o n
twenty-five.
to prevent
particularly
54.
is
and i t
growing
to the
On p r e s e n t
of t h e U n i t e d K i n g d o m w i l l
t h e n u m b e r of c a r s
congestion,
cars.
or
development
in the context
b o t h of p e o p l e and of
over the r e s t
all
and h o u s i n g
which
century
been d e c l i n i n g
regional
basis
country
old n i n e t e e n t h
of s e c u r i n g a b a l a n c e d
the population
of t h e
terra p o l i c y m u s t be r e l a t e d
transport
population,
on t h e
which have r e c e n t l y
Short
term problem
l o o k ahead and l a y t h e
growth in those p a r t s
too dependent
growth i n d u s t r i e s
only slowly.
also
local
w i l l now u s e
knowledge,
consistent with
to
all
draw up
the national
this
Councils
material,
regional
p l a n as a whole
and
other.
Over t h e y e a r s
a range
measures has been b u i l t
of
up t o
financial,
influence
of t h e s e h a v e b e e n s t r e n g t h e n e d
introduction
application
of c o n t r o l s
of
in the Midlands
existing
over
over
building,
on i n d u s t r i a l
and the South E a s t ,
;
building
hew t r a i n i n g
facilities.
1.17
SECRET
and
other
growth.
y e a r by
Some
the
t h e more
vigorous
development
by a n e x t e n s i v e
programme of a d v a n c e f a c t o r y
and r e t r a i n i n g
regional
the past
office
controls
fiscal
new
a n d by t h e p r o v i s i o n
of
99^1
M Id
57.
But t h i s
in addition
is not
that
i n p a r a g r a p h 41
balance
the t e t t e r
above
of r e g i o n a l
policy;
enough.
incentives
should
of
office
establishments;
with coal policy;
refer
therefore
to investment
include measures
development.
development
government
The G o v e r n m e n t
special
funds
to Chapter
mentioned
to secure
/^"Distribution
employment;
proposes
of
a
better
industry
public
investment;
announced i n
connexion
8^/
THE PROSPECTS FOR GROWTH
58.
Given p a s t
Industrial
that is
Inquiry,
and t h e
our n a t i o n a l
all,
The b a l a n c e
The m e a s u r e s
outlined
to
productivity,
to restore
a balance
an e l e m e n t
take
prices
next year
60.
or
effect.
overseas
scarce
i n v e s t m e n t and
and incomes
(This matter
about
one.
the
and i n a w i d e v a r i e t y
There i s
the
a
successful
sufficient
to
repay
discussed
in
inevitably,
The n e e d t o p r o t e c t
in
increase
us
time r e q u i r e d
of s t e r l i n g
of
should enable
is
for
however,
these
the balance
the intervening
s o m e s l o w i n g down i n t h e r a t e
of
period
of e x p a n s i o n i n
the
so.
the achievement
however,
prevent
of t h e g r o w t h p r o g r a m m e ,
- b o t h management and w o r k e r s
with the p o l i c i e s
labour.
achieved
to tackle
and t o a c h i e v e
i n Chapter 7.)
This need n o t ,
industry
to release
and b u i l d up a s u r p l u s
payments and t h e p o s i t i o n
may i n v o l v e
to
is,
government
defence work,
generally,
of u n c e r t a i n t y
measures t o
abroad,
from
t h e d e b t s we h a v e i n c u r r e d .
terms
this
a more d i f f i c u l t
encourage productive
policy for
policies
possible
proposed;
Plan to l i m i t
by i n d u s t r y ,
efficiency
the
o f new
one compared w i t h t h a t
investment
industrial
quantitative
the r a t e
of
countries.
in this
industry
p r a c t i c a l ways,
at
modest
and i n v e n t i v e n e s s
trade balance
evidence
should be p h y s i c a l l y
of p a y m e n t s p r o b l e m i s
spending and p r i v a t e
resources
it
industrial
the
comprehensive range
output
a relatively
b y many o t h e r
59.
in productivity,
being i n i t i a t e d ,
increase
after
trends
required
to increase
Industry has a v i t a l
role
i n v e s t m e n t programmes and b a s i n g
long term view of
long term view,
the future.
but the habit
provided
private
- continue
to push
efficiency
and
to play
its
Many f i r m s
needs
1.18 SECRET to
redeploy
in maintaining
investment
decisions
already take
ahead
its
on a
this
s p r e a d more w i d e l y .
The
if
SECRET
Government w i l l
investment
already
i s b y many f i r m s )
investment
future
The P l a n w i l l
of d e v e l o p m e n t s
that
effort
the
latest
period
of s l a c k
it
be r e g a r d e d a s an o p p o r t u n i t y
to
This w i l l
and t h u s
without
increase
its
ability
the need for
nation's
maintain
measures.
review in the
reassessments will
Government and i n d u s t r y
information
to
stop-go
be k e p t u n d e r r e g u l a r
and p e r i o d i c
the
n
to
should (as
and r e - e q u i p .
expansion in
61.
i m p o r t a n t new i n c e n t i v e s
and any temporary
re-organise
total
Toe p r o v i d i n g
o
light
b e made
can base t h e i r
plans
so
on
the
available.
THE INDUSTRIAL PATTERN OP, GROWTH
62o
A growth i n n a t i o n a l
product
and 1970 ( 3 . 8 p e r c e n t a y e a r )
increase
their
expected
changes,
the pattern
t o 76
63.
output
at
this
industry
of g r o w t h of
cent between
w i l l n o t mean t h a t
rate.
all
1964
industrj.es
Chapter 2 describes
by i n d u s t r y ;
these
demand d e s c r i b e d
the
are related
in paragraphs
to
67 .
below.
The s c i e n c e - b a s e d
equipment,
and t h i s
have
supply,
grow by 8 - 1 0 p e r
expansion w i l l
per
vital
and i n v e s t m e n t .
increases
are
6 per
cent
Within the
are
cent
expected
the
to
biggest
engineering,
a year will
years.
decade
chemicals,
all
terms
capital
be
This
required,
expansion
international
the needed i n c r e a s e
(and
competitive
in
exports
engineering
total
the
largest
t o be i n machine
tools
and
electronics
cent a year).
of t h e e n g i n e e r i n g g r o u p o f
Chapter
the past
and e l e c t r i c a l
industry's
to secure
in
Oil r e f i n i n g ,
in recent
in the
expected
(around 7-8 p e r
others
In absolute
be i n m e c h a n i c a l
a l s o an improvement
is
than
accelerate.
cent a year.
compared w i t h 4f
and t h o s e p r o d u c i n g
and t e l e c o m m u n i c a t i o n s
where a g r o w t h of a b o u t
position)
industries,
expanded f a s t e r
tendency w i l l
electricity
64.
of 25 p e r
The p r o b l e m s ,
industries
and
opportunities,
are discussed
in
9 .
Among t h e
of t e x t i l e s ,
older
consumer goods i n d u s t r i e s ,
clothing,
furniture,
slow growth r a t e s
of 2 p e r
while
is.likely
coal
output
1964 t o 1 7 0 - 1 8 0 m i l l i o n
cent
food and d r i n k ,
a year
to decline
tons
1.19
in
including
or l e s s
are
parts
relatively
expected,
from 193 m i l l i o n
tons
in
1970.
/
2
0
..
65.
The c o n s t r u c t i o n
4-g- p e r c e n t a y e a r ;
Chapter 1 o
industries
w i l l have
the problems
to
involved
e x p a n d by
are
discussed
In energy
just
o v e r 2 p e r c e n t a y e a r b e t w e e n 1964 a n d 1 9 7 0 .
the fuel
a s a. w h o l e ,
industries
demand i s
expected
w i l l be s u f f i c i e n t
and t o p r o v i d e
the necessary margin for
quick r e a c t i o n
to unforeseen
forms
of
Chapter
in
.
66,
of
about
energy.
to increase
to meet
The
c h a n g e s i n demand f o r
These m a t t e r s
are
further
plans
this
flexibility
by
demand,
to
permit
the
different
discussed
in
11.
THE USE OP Pd^SOURCES
67.
The d e g r e e
of Government i n f l u e n c e
varies
a great
d e a l from
a free
society
citizens
their
competing for
such as d e f e n c e ,
are provided
central
spent
on
their
collectively
must t a k e
its
an i n t e r e s t
between
of
But
services
future.
In
distribute
consumer goods
other
and
services,
and r o a d
construction,
and
amounts
and f i r m s
consultations
qualifications
of t h e
This d i v i s i o n
and c a n n o t ,
But i n v e s t m e n t
a
to
be
and
is
it
influenced
therefore,
policies
with individual
i n mind t h a t
use
More d e t a i l s
of
industries.
the
following
It
is
table
given
1.20 in Chapter
15.
dictated
cent
our
of
private
and
investment,
t h r o u g h more
our i n c r e a s e d r e s o u r c e s
are
be
by
which
to savings
and a l s o
taken
sector,
a b o u t 45 p e r
provides
investment
and saving
by t h e p u b l i c
government
national
and t h e Government can i n f l u e n c e
financial
of t h e p r o j e c t e d
any modern
enjoyment
about investment
by t h e i n c e n t i v e s
general
present
can c o n t r o l , c o m p r i s e s
investment;
decisions
decisions,
in the broad division
of t h e
individuals
the Government
period.
kinds
t o b e made on t h e
consumption for
by t h e G o v e r n m e n t .
by i t s
own m i n d s how t o
t h r o u g h Government a g e n c i e s
own s p e n d i n g
by a g r e a t many d e c i s i o n s
total
health
resources
economy t o a n o t h e r .
attention.
decision has
t o meet t h e needs
private
the
of
these.
A p a r t from
product
different
education,
political
of
make up t h e i r
spending between the
services
68.
one p a r t
on t h e u s e
with
is
informal
these
presented
during
the
Plan
(t
28
Table 1
Use of
Resources
Increase
1964 £ million
1964 p r i c e s
-oss n a t i o n a l
product
£ million
(round
numbers)
per
cent
8,160
25
32,639
Balance of t r a d e i n g o o d s a n d
s e r v i c e s , and n e t i n v e s t m e n t
income from a b r o a d
1964-70
- 165
500
1,351
740
55
1,362
320
23
1,147
335
29
525
5
1,209
385
32
194
185
96
546
215
40
1,921
120
6
3,510
970
28
21,038
4,385
21
Investment
Manufacturing
and
Other p r i v a t e
services
industries
Nationalised
construction
and
industries
Stockbuilding
Housing
Roads*
Other p u b l i c
services
Defence
Consumption
S o c i a l and o t h e r
public
services
Personal
excluding
* Hew r o a d w o r k s a n d m a j o r r o a d i m p r o v e m e n t s 5
minor improvements and m a i n t e n a n c e e x p e n d i t u r e .
69.
If
t h e 25 p e r
c e n t g r o w t h programme can be a c h i e v e d
w i l l y i e l d an i n c r e a s e
in national
of r a t h e r m o r e t h a n £ 8 , 0 0 0 m i l l i o n
70.
Of t h i s ,
required
increase
71,
the balance
in private
1964
This l e a v e s
of p a y m e n t s
and n a t i o n a l i s e d
in investment
and t o
industry,
being in manufacturing
personal
on d e f e n c e ,
spending;
health,
and
1,21
SECRET
housing;
education,
N
1970
prices.
r a t h e r more t h a n £6,000 m i l l i o n
between a d d i t i o n a l
expenditure
at
b e t w e e n 1964 a n d
something approaching £2,000 m i l l i o n w i l l
to correct
investment
product
it
roads,
be
increase
the most
rapid
construction.
t o be
and
divided
public
etc.
72.
Of t h i s ,
personal
£4,300 m i l l i o n ,
production.
or over h a l f
The r a t e
be s l i g h t l y
spending i s
faster
the t o t a l
of i n c r e a s e
reflecting
of p a y m e n t s g a p .
consumption
s h o u l d speed up t o a r a t e
The a v e r a g e r a t e
the n a t i o n a l
the f a c t
product
that
of l i v i n g
of i n c r e a s e
74.
services,
part
P r o v i s i o n h a s b e e n made f o r
5 0 0 , 0 0 0 by 1 9 7 0 .
There w i l l
housing,
t h e main source
house-building will
about
that
level
and p o l i c i e s
up t o 1 9 7 0 .
are
substantially
described
schools,
reflects
in the
-
cf
standard
comes
better
homes,
etc.
i n Chapter 17,
public
to l e t .
to
The G o v e r n m e n t ' s
in
Private
the l e v e l
is
housing
at
programme
to
out improvements
these
of
to keep i t
The a b i l i t y
industry;
to
are
meet
in
the
described
10.
programmes
of p u b l i c
consistent
with
public
at constant
expenditure.
the Chancellor's
expenditure
prices
given in Chapters
review
for
undertaking
18 t o
t o an a v e r a g e
22.
for
the
to limit
The d e c i s i o n
the
to
Details
limit
growth
year
are
defence
(the level
of
been mentioned..
substantial
improvements where t h e s e
of s o c i a l
g i v e u s a l l we s h o u l d l i k e
- t h a t w o u l d be i m p o s s i b l e
our r e s o u r c e s w e r e u n l i m i t e d .
aims.
priorities.
The
the
has already
most n e e d e d t a k i n g a c c o u n t
b e t w e e n many d e s i r a b l e
major
of 4 i p e r c e n t a
between 1964/5 and 1 9 6 9 / 7 0 .
1964/65)
programmes p r o v i d e
of a l l
T h e s e h a v e b e e n made
s p e n d i n g t o £ 2 , 0 0 0 m i l l i o n a t 1964 p r i c e s
Estimates
this
hospitals,
and t h e i n t e n t i o n
The G o v e r n m e n t h a s made a c a r e f u l
of t o t a l
over
than that
sector
to recover
construction
75.
consumption
of d w e l l i n g s
organisation
in Chapter
than
a h o u s i n g programme r i s i n g
d e p e n d on c a r r y i n g
the
of
faster
extent
the public
t h i s programme w i l l
of
close
past.
be a s t e a d y i n c r e a s e
annually
The
experienced
t h e growth
of t h e i n c r e a s e
be e n c o u r a g e d
about 250,000 s t a r t s
years
To a l a r g e
in
more and b e t t e r
which i s
few y e a r s .
i n an a d v a n c e d modern community
standards
will
the need to
in personal
as a whole.
t o be e x p e c t e d
national
consumption
a somewhat l o w e r r a t e
a substantial
about through r i s i n g
social
In l a t e r
sustain in the
the P l a n p e r i o d w i l l be a t
in
of t h e p a s t
the balance
73.
increase
about
c o n s u m p t i o n new b e i n g
a t e m p o r a r y phenomenon l a r g e l y
a n y we h a v e b e e n a b l e t o
to take
of p e r s o n a l
than the average
s l o w i n g down i n t h e g r o w t h o f
is
expected
other
They do
are
not
unless
A c h o i c e h a s h a d t o b e made
The p r o g r a m m e s h a v e b e e n
fitted
72.
Of t h i s ,
personal
£4,300 m i l l i o n ,
production.
or over h a l f
The r a t e
be s l i g h t l y
spending i s expected
faster
the total
of i n c r e a s e
to take
increase
of p e r s o n a l
than the average
in
about
national
consumption
of t h e p a s t
few y e a r s .
s l o w i n g down i n t h e g r o w t h of c o n s u m p t i o n now b e i n g
i s a t e m p o r a r y phenomenon l a r g e l y
the balance
of payments g a p .
reflecting
In later
consumption should speed up t o a r a t e
a n y we h a v e b e e n a b l e t o s u s t a i n
73.
The a v e r a g e r a t e
of i n c r e a s e
substantially
in personal
as a whole.
of l i v i n g
a substantial
74.
services,
extent
of t h e i n c r e a s e
schools,
over
this
reflect
in the
sector
-
hospitals,
of
standard
comes
better
homes,
etc.
P r o v i s i o n h a s b e e n made f o r a h o u s i n g p r o g r a m m e r i s i n g
housing,
There w i l l be a s t e a d y i n c r e a s e
which i s t h e main s o u r c e
house-building will
about t h a t
annually
are described
programme w i l l
organisation
in Chapter
i n C h a p t e r 17,
d e p e n d on c a r r y i n g
of t h e c o n s t r u c t i o n
consistent
the l e v e l
of
i s t o keep i t
t o meet
out improvements
these
at
programme
The a b i l i t y
industry;
expenditure.
v/ith t h e C h a n c e l l o r ' s
public
at constant
expenditure
prices
given i n Chapters
Estimates
Private
are
in
the
described
10.
programmes of p u b l i c
spending
to
to
public
The G o v e r n m e n t ' s h o u s i n g
The G o v e r n m e n t h a s made a c a r e f u l
of t o t a l
in
to l e t .
and t h e i n t e n t i o n
l e v e l u p t o 1970..
and p o l i c i e s
of d w e l l i n g s
be e n c o u r a g e d t o r e c o v e r
about 250,000 s t a r t s
75.
To a l a r g e
in the public
more and b e t t e r
5 0 0 , 0 0 0 b y I970o
this
standards
than
than that
t o be e x p e c t e d i n an a d v a n c e d modern community
about through r i s i n g
social
part
faster
consumption
the n a t i o n a l
that
close
past,
be a t a somewhat l o w e r r a t e
the f a c t
experienced
t h e g r o w t h of
the Plan period w i l l
product
The
t h e need t o
years
in the
will
r e v i e w of a l l t h e
T h e s e h a v e b e e n made
undertaking
t o an a v e r a g e
to limit
t o £2,000 m i l l i o n
The d e c i s i o n
a t 1964 p r i c e s
f o r 1964/65) h a s a l r e a d y
programmes p r o v i d e
for substantial
most n e e d e d t a k i n g
account
g i v e u s a l l we s h o u l d l i k e
Details
to limit
1.22
are
of t h e
The
other
improvements where t h e s e
priorities.
are
T h e y do n o t
- t h a t would be i m p o s s i b l e
aims.
growth
defence
(the level
been mentioned-
of s o c i a l
our r e s o u r c e s w e r e u n l i m i t e d .
b e t w e e n many d e s i r a b l e
the
of 4ir p e r c e n t a y e a r
b e t w e e n 1964/5 and 1969/70.
18 t o 22.
major
unless
A c h o i c e h a s h a d t o b e made
The p r o g r a m m e s h a v e b e e n
fitted
/23
'
i n to what t h e n a t i o n can
76c
As f a r
as
carry
out these
in tax r a t e s
afford,
can be e s t i m a t e d
grovrth o b j e c t i v e
can be a c h i e v e d ,
expenditure
of
course,
it
of p e r s o n a l
savings.
increase
of h i g h e r r e a l
and p r o v i d e d
s h o u l d be p o s s i b l e
although
be n e c e s s a r y
economy i n b a l a n c e .
the
present,
programmes w i t h o u t
t o keep the
to limit
at
b e t w e e n now a n d 1 9 7 0 ,
d i r e c t i o n may,
2&Q
changes
in the
Much w i l l
incomes l a t e r ,
1.23 personal
to
increase
in
prepared
years
course
voluntarily
spending in the
the lower w i l l
either
intervening
d e p e n d on t h e
The m o r e p e o p l e a r e
in their
any n e t
the
interest
t a x a t i o n need to
be.
Oorrigendum Chapter 7, Balance of Payments Page 7.12, table 7.1: Please insert following note to figure of 200 It is estimated that this figure would be about £285 million with a total defence budget of £2,200 million (at 1964 prices). The figure shown in the table thus assumes a method of reducing total defence expenditure from £2,200 million to £2,000 million which involves a reduction of about £85 million in expenditure abroad. (The figures in the table do not allow for imports and exports of military equipment or for exports resulting from the German offset agreement. These are all included in the visible trade account,) SECRET
7.
THE BALANCE OF PAYMENTS lnti?odiacti^qn
For too long the U.K. h
suffered from a weak balance of
The last decade has seen not only a series of
payments.
short-term crises hut also a weakening of the underlying
Sterling was in difficulties in five of the last
position.
ten years.
On some occasions these difficulties sprang
almost entirely from capital movements.
On others they were
generated by a worsening of the current account, and were met
by sharp checks to economic expansion.
This has had adverse
effects on productive investment;, and hence on our long-term
growth potential.
2,
It is our aim to break out of this vicious circle, and
to introduce and maintain policies which will enable us to
enjoy more rapid and more sustained economic growth.
3.
In 1961+ the overall deficit rose to an exceptionally high
level.
It amounted to £ 7 ^ 5 million, with the current and
capital accounts each in deficit of about one-half of this sum,
and would have been £ 8 0 0 million if we had not taken a waiver
of the payment of interest and capital on the North American
loans.
k.
Part of the overall deficit can be accounted for by temporary
factors.
There was an exceptionally heavy net outflow of
private long-term capital, which rose to £ 2 5 0 million from an
annual average of about £ 9 0 million over the last decade.
The
main forces at work were a large increase in o?II investment
overseas, and a reversal of the considerable net portfolio
investment inflow of previous years into an outflow of nearly
£60 million.
5.
The current account deficit reflecteda very rapid rise in domestic demand, which included an acceleration in fixed investment £nd abnormally heavy stockbuilding.
This upsurge in demandled to ah increase of no less than i1 per cent in the volume of imports 7.1 "between 1 9 6 3 and 1 9 6 U .
More than half of the increase was
in imports of industrial raw materials ana semi-manufactures,
while imports of capital equipment formed a large part of the
increase in finished manufactures.
Shortages oi capacity
were a factor stimulating large increases in some imports.
The increase in the volume of imports was reinforced "by a
4 per cent rise in import prices, especially of basic materials
and food, which led to a temporary worsening in the terms of
trade;
6.
this has since been partly reversed.
The Government has taken a series of measures to
redress the position, and it is hoped that at least half the
deficit will have- been removed this year.
Kone-thc-less,
there is still a substantial imbalance to bo removed, and the
debt incurred in 1 9 6 4 and 1 9 6 5 will have to be repaid by the
end of the decade.
7.
The task of correcting the balance of payments and
achieving the surpluses necessary to repay our debts, while at
the same time fostering the rapid growth of the economy, is
the central challenge we face in economic planning.
Particular Features of Recent Trends in the United Kingdom Balance of Payments 8.
There are four main features of the United Kingdom balance
of payments over recent years which should be noted.
9.
First, there has been a heavy and rapidly growing deficit
on the Government^ net expenditure abroad on both current
invisible and capital accounts.
The deficit on current
invisible account reached £1+30 million in 1 9 6 k , more than three­
times the level ten years ago, almost wholly due to large
increases in military expenditure and aid.
At the same time,
the net outflow of official capital (mainly or, aid),now running
at over £ 1 0 0 million a year, is also much larger than it was
ten years ago.
7.2
10.
Secondly, there has also "boon a persistent net outflow of
private long-term capital.
This has averaged over £ 9 0 million
a year for the last decade, hut rose to the high
million last year.
i e V o l
of £250
That was exceptional, hut even so there Wore
indications that a substantial outflow v/ould continue.
11.
Thirdly, our exports have "been growing only slowly, at an
annual average rate of about 3 per cent in volume over the last
decade.
This has not been enough to sustain the rate of
economic growth of which wo arc physically capable.
Our exports,
which are mainly manufactures, have also been rising much more
slowly than world trade in manufactures, so that our share of tho
value of teat trade has fallen from 20 per cent in 195k to under
Ik per cent in 1 9 6 k .
12.
Fourthly, our imports of manufactures have been rising
rapidly.
Imports of finished manufactures have increased in
volume by 12 per cent a year ovo-r th^ decade to 196k, and imports
of semi-manufactures by about 8 per cent although part of this
increase is attributable to tho trend towards importing goods
in the form of somi-manufacturos rather than'basic materials.
13-
Just as tho fall in our shar^ of world exports or manufac­
tures has been most rapid in the years of rapid expansion,
so too has the increase in imports of manufactures been most
rapid in those years.
This suggests that part ox our difficulties
on visible account are to be explained by shortages of capacity
resulting from insufficient investment in the past, and from too
slow a rate of installing labour-saving machinery and of
incorporating new techniques.
Sorao significant examples of this
are to be found in chemicals, hearings for motor vehicles, and some
sectors of the engineering field, in particular machine tools.
Policies
1k.
It is essential, in order to repay our international indebtedness, to attain and maintain an overall surplus in our international accounts. 7.3
SECRET
tic must look for improvement in all parts of the
external balance.
Of particular importance are the policies
aimed at the four features of the balance of payments outlined
above.
i) Government Expend!ture 15.
The Government has decided to restrain severely W o major
items of its overseas expenditure.
First, it intends to restrict
total defence expenditure in real terms tc the level of the
I96I4./65
Estimates, and to bring about an absolute reduction in
that part which is incurred overseas.
16
The grants and loans which make up the Government's
programme for economic aid, also place a burden on the
balance of payments.
The Government is fully aware of the
importance of aid to the developing countries, and is taking
steps to increase the effectiveness of what aid it gives.
It will, however, be necessary to oorutinise the aid programme
with particular care
so long as the United kingdom balance of payments is under such great strain and we are faced with the need to repay the overseas indebtedness recently incurred. ii) Ojfcjrsoas Investment 17.
The extent of the capital outflow has not been commensurate with what the United Kingdom could afford, and a /change of direction in policy towards overseas investment was
essential.
There is a limit to the amount 01 overseas invest­
ment which a country can afford.
Much of the benefit of
overseas investment accrues tc the recipient countries, and
the return from investment overseas is on average considerably
less, from the point of view of the national economy, than the
return on home investment.
Oui tax system has tended to give
too favourable a treatment to overseas compared with domestic
investment.
This is inappropriate when domestic fixed capital
formation will need to take a rising share of gross national
7.k
SECRET
product to procure the growth of output we need.
The benefits of overseas investment to the balance of payments - in the form of interest end dividend income, end of increased exports of goods and services - are of course recognised, but in many cases those benefits accrue only over a longer period.
And in a time of acute strain on the balance of payments short-run considerations must to some extent prevail.
It is, therefore, reasonable to employ a reduction in net overseas investment as one of the means to bring about the required improvement in our The additional degree of deflation which external accounts.
might otherwise be necessary would depress domestic activity by a multiple of the foreign investment forgone. 18.
The Government has already taken a number oi steps which
will substantially reduce the net outflow of long-term capital,
in the field both of Exchange Control and of taxation.
The
tightening up of Exchange Control, while still allowing direct
investment which brings quick returns to the balance of payments,
is aimed both at increasing receipts and reducing payments on
capital account.
This will be achieved by new measures intro­
duced in the April 1965 Budget:
the diversion to the reserves
first of certain receipts of foreign currencies by U.K. residents
which had previously accrued to the investment currency pool,
and secondly of 25 per cent of the proceeds of sale of non­
sterling currency securities held by U.K. residents.
These
measures are expected to reduce the net outflow by about £100
million in 1 9 6 5 - 6 6 .
19.
In addition to these measures the corporation tax will
affect both the outflow and. the inflow of private capital,
though in this case the full favourable effect on our capital
account is not likely to be obtained during the first few years
of the- Plan period.
7.5 SECRET
20.
United" Kingdom investment abroad is likely to be
discouraged because companies will b e a b l e to offset their
overseas tax liabilities only against corporation tax, not
against the income tax payable on dividends paid to shareholders.
Companies will therefore be obliged to restrict the rate of
growth either of the dividends they pay out to their share­
holders, or of the profits they plough back abroad, or to
combine both policies.
The former will restrict the incentive,
the latter the ability, to invest abroad.
21.
Two other budgetary measures - the withdrawal of the Overseas Trading Corporation scheme and of relief to United Kingdom investors from the underlying tax borne by the companies abroad in which the;/ invest - will also tend bo reduce overseas investment.
The Government recognises, however, the part which private investment can play in overseas development and has undertaken to keep under review the impact of these measures on the developing countries, as the Chancellor made clear in his Budget Statement. 22,
The Corporation Tax will also affect inward investment. Non-resident companies will pay Corporation Tax on profits earned through branches in the United Kingdom, while subsidiaries of such companies will pay corporation tax on their profits, and payable to their parents. in addition will pay with holding tax. on dividends/The post-tax return on such investment will probably be higher under the new system, although much depends on the distribution policy of individual companies and the rates of withholding tax still to be negotiated.
The new system should therefore encourage overseas investment in the United Kingdom, (ijpleasures to Promote Exports 23.
A great deal of help, advice and information on selling abroad is available to firms from Government sources through the Expert Services Branch and the Regional Offices of the Board of Trade, and through the commercial officers of the Diplomatic 7.6 Servicej and credit insurance for exports is available through
the Export Credits Guarantee Department.
A continuous effort is
made by means of personal contact to make all the available­
services more widely known and to encourage firms to make use of
t no m *
2k.
At the same time the Government has introduced a number of
new measures designed to encourage and facilitate a speedier
growth in exports, some of them aimed particularly at smaller
firms that do not export or export little.
The Export Rebate
Scheme was introduced providing for the refund of certain
indirect taxation borne by exports amounting to about 2 per cent
of the value of our exports or a total of more than £80: million per
annum.
Of this it is expected that, for example, about £10" million
will go to the motor industry:, £ 5 i rillion to the electrical'machinery
industry and £1 million to the whisky industry.
Credit insurance
f
facilities have been greatly improved by expanding E.C.G.D. s Bank
Guarantee facilities and by halving their cost, by reducing
premium charges and increasing percentage cover.
A list of some
kOO established exporters willing to help firms making comple­
mentary products to export has been compiled and published as a
booklet - the so-called Pick-a-Baek scheme - which has been given
a wide circulation.
Government finance has been made available
through the British Rational Export Council to encourage industry
to send selling missions abroad and bring buying missions to
Britain and to support collective market research abroad by
sections of British industry.
A study is being made of the
feasibility of setting up a new form of export selling organisation
which will give
special attention to the needs of those smaller
at present companies which/export either very little
or not at 3.11
o
7.7
25*
In addition, the Board of Trade has substantially increased
its participation in and financial support for export
promotional activities overseas and an extensive programme of
over sixty trade fairs and nearly forty British Weeks and
store promotions is well advanced.
The Commonwealth Export
Council has been established and the activities of the B.N.E.C.
extended by the setting up 0 1 ten Area Committees concerned with
different parts of the world.
Many special meetings have been
meld between Government Departments and industry to consider
industry'3 problems in promoting and expanding exports, and
close liaison is being maintained.
26.
The direct efforts of the Government, helped by the B.N.E.C., to encourage and facilitate exports are being com­
plementdd by the work of trade associations and chambers of commerce and by the Economic Development Committees.
Most of these committees have under review ways (described more fully in Chapter k) of increasing the exports of their respective industries, notably by providing additional production for export, by co-operative sales promotion schemes, the wider ase of consortia and the raising of export levies to promote overseas S 3.1 U S
e
27.
Delays in transit impose a significant handicap on
United Kingdom exporters.
Eliminating auch delays is especially
important in selling to Western Europe, an area which takes
just under kO per cent or our total exports and in which
British industry is now at a disadvantage because we frequently
cannot quote delivery terms competitive with those of our
continental rivals.
Hence, the new E.D.C. for the Movement of
Exports, which brings together users and suppliers 0 1
all the
necessary services, has been asked as a matter of urgency to
produce agreed plans for speeding up exports.
7.8 q n
(iv)
Measures to reduce the growth, of manufactured ireports
2 8 .
6 ^ 0
Government and industry working through the
Economic Development Committees, have initiated measures
to contain the growth of imports of manufactures.
Detailed studies undertaken by these Committees have led
to a set of programmes designed to eliminate particular
obstacles to our ability to compete successfully with
imports, in the fields of machine tools (with a twenty­
four point action programme), of chemicals (with plans to
instal capacity to produce certain chemicals not yet
included in the range of domestic output),and of
mechanical engineering (with proposals to improve market
intelligence and thus avoid unnecessary imports through
ignorance of what is available in this country).
(v)
The Economic Environment 29.
While the preceding paragraphs have outlined
measures directly affecting certain items in the external
accounts, perhaps the most important policies influencing
our external position are in fact those aimed at the
domestic economy.
It is obvious, for example, that
exports will benefit from the greater competitiveness,
higher investment, and higher productivity on which the
whole growth plan is based.
At the same time, such
policies will also improve our- power to compete with
imports.
30.
Furthermore, the cuts in certain forms of defence
expenditure will release capacity, skilled, labour and
highly qualified engineering and design staffs for other
work, thereby increasing the competitive power of
British industry, and providing
-valuable resources
which the export industries can absorb in their response
to export incentives and. world demand. 7.9
SECRET^
n
"
31.
%3
Finally, the impact of a successful prices and incomes
policy on the rate of rise 01 domestic prices and costs, while
of great importance in dealing with the domestic stresses and
injustices of inflation; is of
great
international competitive position.
importance to our
It is unlikely that we
will he able to achieve the required increase in exports and to contain the growth of manufactured imports unless our costs and prices move more favourably than in the past in relation to those of our competitors. The Prospects 32.
The origins of our difficulties arc deepseated and the
balance of payments deficit in 1 9 6 k was of formidable size.
But considerable progress towards equilibrium has already been
made, and the important changes of policy which have already
been made should create conditions in which the balance of
payments problem can at last be mastered.
The Plan is not
inflexible, and if progress on external account should not be
sufficiently rapid further steps will be taken to accelerate
the improvement.
33.
But just because so many new measures have been and are
being introduced, the normally hazardous task of forecasting
economic events especially as far into the future as 1 9 7 0 ,
is made extremely difficult.
What is obvious is that we cannot
simply extrapolate past trends.
Indeed it is precisely the
purpose of many of these measures to alter those trends, and
thereby to set the economy on to a new path.
unique solution to the problem.
Nor is there one
Each part of our external
account has its role to play - and tho objective set can be
attained in a number of different ways.
In the section that
follows we show the general linos of a satisfactory balance of
payments in 1 9 7 0 .
7.10
3LL.
It is
s
however, difficult to ho precise about the timing
of the effects of these policies and measures.
With the need to achieve balance in the course of 1 9 6 6 , and to earn an
"adequate surplus yoar-by-year thereafter, the rate of growth of the economy in the next year or so may have to be slower than the rat^ of growth of capacity or than the rate of expansion in later years. 35.
Already there are signs that the policies to restore
external balance arc beginning to bear fruit.
For example,
the deficit on the trade balance in the first half of 1965 was
little more than one-half the rate of 196U.
In the first
quarter, the deficit on the capital account remained large, but
this is expected to be greatly reduced in the second quarter.
A start has also been made in reducing the balance of payments
cost of defence expenditure abroad.
Agreement has been reached with the Federal Republic of Germany on the offsetting of our defence costs in Germany;
as a first step a deposit of £ 4 1 million has been made which is expected in due course to finance
additional United Kingdom exports.
The Balance in 1970
[i) The Overall Surplus Required 36.
We shall need to repay during the years 1 9 6 7 - 1 9 7 0
assistance amounting to £900 million from the International
Monetary Fund and from Switzerland.
These obligations create
the need for a substantial overall surplus in the balance of
payments over the years concerned.
No precise figures can be
put on the surplus that will be necessary;
its amount will
depend on the extent to which short-term capital returns to
London with the restoration of confidence as well as on the balance of payments of the Overseas Sterling Area. As a basiB 7.11 for planning, it has been thought prudent to assume that a
surplus of £250 million will he necessary
in 1 9 7 0 .
If we
allow for a positive balancing item of £50 million., this would
require an identified surplus on current and long-term capital
account of £200 million,
i) Government Expenditure Abroad 37.
T a b l e 1 gives estimates of net Government current and
capital expenditure abroad in 1970 compared with 196k in 196k
prices.
The figure for military expenditure in 1970 is
appreciably below that in 1 9 6 k .
Economic aid to developing
countries is assumed to increase rather
less fast than the
national product.
Only a proportion of this expenditure is a net drain on the overall balance of payments, since much of the aid is tied to United Kingdom goods and services and, where untied, some will in any case be spent on them. (1 )
38.
Total net external expenditure on Government account
falls by about £30 million, at constant prices, from £550 ' million in 196k to £520 million in 1970 TABLE 7 . 1
GOVERNMENT EXPENDITURE ABROAD Is millicm^ 1 gSTT^prices"', Military expenditure (gross)
Aid -
Grants 88)
Loans 106)
Other
(net) Current 71 Capital 1 k )
196k
272
1970
200
19k
230
^85
551
,90
520
1)
^Including Other Government Expenditure (net). This covers diplomatic and administrative expenditure and the repayment of earlier loans under the aid programme, plus certain defence receipts. 7.12 Private Long-term Capital
39*
It is difficult to estimate at all precisely how the
private capital account will develop over the coming years.
A substantial falling bach in net investment abroad from the
high level of 1 9 6 h was in any case to be expected, given the
exceptional transactions in that year.
The new measures
described (in paragraphs23-27abcve)i i 1 1 certainly carry the
r
process further, and by the end of the Plan period the normal
situation may well become one in which private investment in
the United Kingdom from abroad exceeds private investment by
the United Kingdom overseas, even though the latter is
expected to remain substantial.
As a basis for planning,
it seems reasonable to envisage a net private inflow of the
order of £ 1 0 0 million a year by 1 9 7 0 .
This compares with an
average net outflow of about £ 6 0 million in the five years
1960-6h
Private Invisible Trarisact2 cms hO.
The net surplus on private invisible transactions has averaged £kOb million in 1 9 5 5 - 1 9 5 9 and £ 5 1 5 million in 1 9 6 0 - 1 9 6 k , reaching £ 6 1 0 million in 1 9 6 k .
It has been estimated at £ 7 0 0 million in 1 9 7 0 at 1 9 6 k prices.
This
improvement on 1 9 6 k is the outcome of a wide range of factors operating on different parts of the account.
The main items are discussed in the following paragraphs. k1.
In the transport sector, the shipping account
has
shown, in recent years, a small deficit, and civil aviation, a moderate surplus.
Greater productivity in the whole economy as well as in the industries concerned 7.13 together with a successful incomes and prices policy can
help to improve the performance of both these industries,
especially to the extent that they seize the opportunities
presented by growing overseas trade.
Receipts and payments
on shipping may therefore be expected to be roughly in
balance, while the surplus on aviation should grow.
L2.
Expenditure on travel services must be expected to rise
at a high rate, although probably less fast than the very
rapid expansion in the early years of this decade.
On the
other hand, an improved United Kingdom cost position can
contribute
,' to the growth of the British
tourist industry and thus to a substantial improvement in our
earnings.
On balance, the deficit on the travel account is
expected to continue to rise somewhat.
2+3.
The already large surplus on "other services" - a big
miscellaneous category - can be expected to grow further.
Of particular significance in this category are the financial
services associated with "the City".
It is clear that the
United Kingdom has a well-established position in supplying
the banking, merchanting and insurance facilities which are a
fundamental part 0 1
!
the City s expertise and a major con­
tribution to the balance of payments.
With increasing
opportunities in a growing world economy, we can expect the
large surplus on these transactions to rise further.
2+I+.
The development of interest, profits and dividends is
extremely difficult to predict, since there are so many off­
setting forces at work.
A more competitive and more rapidly growing United Kingdom economy ought to attract overseas direct and portfolio investment, and thereby increase the income due to be paid abroad.
On some existing foreign­
owned assets in this country, moreover, the effect of the Corporation Tax seems likely to increase the amounts avail­
able to pay dividends abroad. I15.
On the receipts side, the rate of increase of our credits is likely to "be adversely affected "by the slowing down in the growth of our stock of overseas assets due to the new exchange control measures and the Corporation Tax.
Nonetheless the net result, certainly within the Plan period, seems likely to he a continuing, hut limited, growth in our net income from abroad, because our existing stock of overseas assets is so much larger than the stock of overseas assets in the United Kingdom. Interest received on inter-governmental loans made by the United Kingdom in the past and on trade credit are also likely to go on increasing. 7.
15
Visible Trade
1+6.
The items covered so far would show a net favourable
balance of £28 0 million in 1 9 7 0 , with a net inflow of private
capital of £100 million and net earnings on private invisible
transactions of £700 million more than offsetting Government
expenditure abroad of £520 million.
To secure the identified
overall surplus of £200 million mentioned in (i) above, or
£250 million before allowing for the balancing item, the deficit
on visible trade would have to be reduced to £80 million.
Although this represents a very considerable improvement corn­
pared with the £550 million deficit recorded in 1 9 6 k , it is a
swing of only some £80 million compared with the average deficit
in the previous decade of £160 million.
great reduction in the deficit
The prospects of a
in visible trade are discussed
in the following paragraphs.
Exports
h7.
Over the past decade, the volume of United Kingdom exports
rose by an average of about 3 per cent per annum.
Allowing for
the changing geographical and commodity composition of our
exports - a growing proportion of our overseas sales now goes to
the more rapidly expanding markets and consists of goods for
which demand is growing relatively fast - an extrapolation of
past trends would lead us to expect a rise of not fa:, short
of k per cent per annum in the future.
Indeed, in the first
tnree years of the original National Economic Development Council
growth programme, 1 9 6 1 - 1 9 6 k , the volume of exports did rise at
that rate.
k8.
It ought certainly to be possible to improve on this
performance in future yeais.
During the last decade the volume
of world trade in manufactures increased at rather more than 7
per cent a year, with the exchange of manufactured goods between
7.16
S E C R E T N
the industrial countries the main expansionary element.
The
growth of demand in Western Europe may slow down somewhat
during the rest ox the 1 9 6 0 s after the very rapid increase in
the last ten years, hut the United States economy seems likely
to continue growing at the faster rate of the past few years,
and thereby keep world demand no less buoyant than in the last
decade.
I4.9.
The ability of the primary producing countries to
increase their imports will depend on their export earnings and
the inflow of long-term capital,and, in the case of the
developing countries, on their receipts of aid.
These in turn
depend closely on the rates of growth and the policies of the
industralised countries.
It seems reasonable to expect the
of the developing countries imports/to continue to increase slowly over the Plan period. 50.
We cannot avoid great uncertainties in assessing world
prospects so far ahead.
In the immediate future, some siowing­
down in the rate of growth of world trade seems likely, but in
the longer run the rate of expansion should not be significantly
lower than in the recent past.
There should therefore be no
lack of opportunity for- a substantial increase in the rate of
growth of United Kingdom exports.
The evidence 0 1 the
Industrial Inquiry suggests that British industry itself
expects a big improvement in our export performance.
The
results imply a rate of growth of United Kingdom exports (in
volume) of slightly over 5 t per cent per annum, which in turn
would mean the share of exports in manufacturing output rising
from 25 per cent to about 27 per cent.
51.
The prospects for each industry's exports were an
important question asked in the Inquiry;
are summarised in Table 2 .
the replies received
About half the industry groups
expect a noticeable improvement in their export performance, as
a result of recent'or prospective changes in the structure of
their industry, or of their markets or of their products.
7.17
SECRET a
- -
SECRET
TABLE 7 . 2
EXPORTS^BY J.PUS^TRY*
(£ m i l l i o n ,
1964 p r i c e s ,
1970
964
Sericulture 5 forestry
land fishing
64
trade
account
19o4-S0
per cent
p e r annum
"J - o
basis)
1;9 6 0 - 6 4
per cent
p e r annum
1964-70
per cent
p e r annum
16.1
:
39
-9.6
6.8
?ood drink and tobacco
235,
319
2.0
6.3
5.3
Jhemicals and allied
industries
528
773
8.0
5.3
6.6
fetal
315
31 9
7.4
0.5
-0.2
Mechanical engineering
816
1281
1.8
5,6
7.8
Electrical engineering
319
499
4.1
2.8
.7.7
45
55
-0.3
-9.7
3.7
vehicles
817
1110
6.2
1 .8
tietal goods n.e,s.
181
1.5
1 .9
textiles
389
474
leather, clothing and
I footwear
72
112
picks, pottery, glass,
jcenent, etc,
70
93
timber, paper, printing
" ::.d publishing
115
107
lining and quarrying
s
manufacture
Shipbuilding
46
-2.0
5.2
-0.3
3.4
3.4
7.5
0.7
-0.5
4.8
165
5.1
4.9
6.2
146
2.8
0.7
5.3
31
7.0
31.9
104
0.4
0.6
I TOTAL
4254
3.4
3.0
I TOTAL FOR WHICH
ESTIMATES AVAILABLE
3874
"\. 4
2.9
Ither manufacturing
I Indus trie s
Ither
pclassified
5378
5.6
me i n d u s t r y d i s t r i b u t i o n o f e x p o r t s f o r 1 9 5 4 - 1 9 6 4 i s b a s e d o n a n
a n a l y s i s of t h e T r a o ^ a n d N a v i g a t i o n A c c o u n t s ( s u p p l e m e n t e d b y
r e f e r e n c e t o t h e A n a n u a i ^ t a l e i e h t o f Trade") , e a c h i t e m i n t h e a c c o u n t s
The f i g u r e s t h u s d e r i v e d f o r e x p o r t s
being a s s i g n e d t o a n i n d u s t r y .
in 1964 d i f f e r s o m e w h a t f r o m e s t i m a t e s m a d e b y i n d u s t r i e s
the
p a r t i c i p a t i n g i n t h e I n d u s t r i a l I n q u i r y o f t h e i r e x p o r t s i n 1964?
aifferences, however, were genera.lly f a i r l y s m a l l .
JMustry e x p o r t s f o r 1970 w e r e o b t a i n e d b y a p p l y i n g t h e 1 9 6 4 - 7 0
percentage g r o w t h f o r e c a s t b y e a c h i n d u s t r y t o t h e a p p r o p r i a t e 1 9 6 4
export f i g u r e s h o w n i n t h e f i r s t c o l u m n .
Where I n d u s t r i a l I n q u i r y
I estimates w e r e a v a i l a b l e f o r a s u b s t a n t i a l p r o p o r t i o n , b u t n o t t h e
whole, of a n i n d u s t r y , t h e r a t e o f g r o w t h o f t h e p a r t s f o r w h i c h
As c a n b e
e s t i m a t e s h a d b e e n made w a s t a k e n t o a p p l y t o t h e w h o l e ,
seen from t h e t a b l e n o e s t i m a t e s h a v e b e e n m a d e f o r c e r t a i n i n d u s t r i e s ,
aid t h u s t h e t o t a l i n t h e L a s t r o w e x c l u d e s t h e s e .
52.
Both electrical and mechanical engineering forecast a
much faster growth of exports than during the last five years.
These results are expected to arise from rationalisation of
production and of standards aria from increased investment/.
The international rationalisation of standards is a hey factor­
too for electronics and scientific instruments, even in the
face of strong competition.
Both woollen textiles and clothing
expect to increase the rate of growth of exports as a result of
more modernisation of their capital equipment, and (in the
latter case) of very competitive pricing.
The paper and hoard
industry expects to raise the rate of growth of exports, in
particular by switching sales efforts towards the Common Market
countries, and by further developing more specialised and
sophisticated products.
53.
That part of the textile industry based on cotton and
man-made fibres expects to increase
in recent years.
its exports after a fall
This is the anticipated result of vigorous
rationalisation of the structure of the industry, and of new
investment and of new methods currently being introduced by the
two large man-made fibre producers.
5d.
The industries mentioned mainly see their improved
prospects in the export market as resulting from factors
particular to their own industries, particular investment
projects, or new techniques.
General assumptions underlying
the export forecasts were the Plan growth rate for the economy
as a whole and world market prospects broadly in line with
past experience.
Some industries made it clear that their
ability to secure the rise in export sales they were fore­
casting was subject to certain more specific conditions,
which will need to be further considered by the Government and
the industries concerned.
7.18 55.
A rise of United Kingdom exports by just over 5i? per
cent per annum is, of course, substantially above the rate of
growth achieved in the oast, and the fact that this projection
is based on industrial evidence should therefore not be inter­
preted as implying that the attainment of the higher growth
rate will be easy.
On the other hand, it would be equally
wrong to regard a higher export growth rate as beyond our
reach.
Industry
itself does not think so, and many of our
competitors have enjoyed average rates of growth of exports substa­
ntialtyhigher than that now being projected for the United Kingdom.
Given the industrial evidence, the continued favourable outlook
for world trade and the success of the policies adopted by the
Government and put into effect in cooperation with industry
(cf paras . 2 3 - 2 7 a b o v e ) , it seems reasonable to project a growth
rate of 5 z per cent per annum in the volume of our total exports,
or slightly less than that resulting.from the Industrial Inquiry.
7.19
SECRET
Imports
56,
Over t h e
ten-year
average r o s e by 5 p e r
in value)0
faster
volume i n c r e a s e
cent
was j u s t
varied
of
4 per
under
cent
considerably,
rose
and of m a n u f a c t u r e s ,
Imports
relatively
especially
(and
(l960-64)
past
the
The i n c r e a s e s
commodity g r o u p s
of f o o d ,
slowly,
finished
oil
slightly
p e r annum.
t h e main c o n s t i t u e n t
and of b a s i c m a t e r i a l s
fuels
p e r annum i n v o l u m e
During t h e more r e c e n t
in import volumes
however,
1954-64 U n i t e d K i n g d o m i m p o r t s
period
have,
d r i n k and
while
tobacco
imports
of
manufactures,
grew
rapidly,
57.
The f a s t
u s e of
oil
increase
as a source
The r a p i d
rate
low l e v e l
prevailing
progressive
of
cuts
of
tariffs.
on i m p o r t s
of
is
clear
of m a n u f a c t u r e s
payable
the general
that
imports
Moreover,
there
on E , F . T . A .
in
the r a t e
part
in
of
the
(see p a r a g r a p h "
the measures
the i n c r e a s e
59.
29-31 ) w i l l ,
less fast
of
in manufactured
of m a n u f a c t u r e d
of f i n i s h e d
Moreover,
and. c o m p e t i t i v e n e s s
The I n d u s t r i a l
Inquiry
goods.
manufactures
of
the
quantita­
have also
been
the
since
only
rates..
of
paragraphs
due t o
imports have been
ment/Committees have t a k e n a number
(cf,
relatively
important have been
needed i n o u r b a l a n c e of p a y m e n t s .
The N a t i o n a l
Council and t h e Economic Development
the e f f i c i e n c y
economy.
o t h e r members of E . F . T . A , ;
a reduction
).
growing
from t h e
c o m p l e t e b y 1959-,
must p l a y a prominent
28
the
some e x t e n t
Particularly
from t h e
30 p e r c e n t
reflects
t h e U n i t e d Kingdom
on s u c h i m p o r t s ,
1965 d u t i e s
It
fuels
ago was t o
substantially
1st January
58,
energy in
ten years
removal,
many r e d u c t i o n s
of
of
g r o w t h of m a n u f a c t u r e d
tive r e s t r i c t i o n s
tariff
in imports
of
the
economy
imports
improvement
Economic
steps with this
course,
Develop-
end i n
adopted
to
view
improve
generally
also help to keep
down
imports,
included
The r e p l i e s
will
than in t h e l p a s t ;
g r o w t h of
a set
of
received
continue to r i s e
the r i s e
7.20 SECRET
questions
suggest
on
imports
that
imports
strongly,
in imports
of
though
seni-manufacturos
i s e x p e c t e d by i n d u s t r y t o
r a t e of g r o w t h of
the I n d u s t r i a l
over t h e
1964;
growth i s
60o
of f i n i s h e d
manufactures
Inquiry is
about 3 per
c e n t p e r annum i n
1
6
4
/
I
9
6
compared w i t h
0
4 per
1
9
6
expansion of t o t a l
various p o l i c i e s
of
imports
figures
on t h e
large
- the
in this
and,
just under 9 per
imports
an a v e r a g e
per
of e n e r g y r i s i n g
also
by t h e
rate
of
imports
of
past
adoption
to reduce
26
- 2 9
of
the
above).
equipment
not
estimates
of g r o w t h o f
a rate
and
faster
by t h e
paras.
between
5 h per
are,
cent
of i n c r e a s e
of
annum.
tend to
i m p o r t s of f u e l s .
because
is
in the
result
in
rate
the scope for
of
further
likely
importance
in
a number of m a r k e t s ; :
a higher proportion
of f u e l
imports
is cheaper than
oil
products).
over t h e p e r i o d
is
over
7
2
capacity will
The a v e r a g e
5 per
,
t o become more
consisting
1
cent per
of
but
increase
of
displace­
limited
moreover,
result
crude o i l
annum a t
a
increase
is
the e x p a n s i o n of U n i t e d Kingdom r e f i n e r y
consumption
in the past,
c o a l by o i l
just
and
0
years
1 9 7 0
assumed
other,
manufs,ctures,
expected
its
6
market
taken
The r e s u l t i n g
s i owing-down i s n o n e t h e l e s s
ment of i n d i g e n o u s
9
uncertainty,
the t o t a l
somewhat more r a p i d l y t h a n
This
of
difference
of m i l i t a r y
economic e x p a n s i o n w i l l
increases
of
(cf,
Inquiry.
finished
cent
I
rate
six
In e s t i m a t i n g
on t h e
category
Industrial
p e r annum a n d f o r
as i t
degree
the
size
one h a n d ,
demand,
for s e m i - m a n u f a c t u r e s ,
Faster
estimated
volume
between
of m a n u f a c t u r e s
generally represent
A l l o w a n c e w a s a l s o made f o r
61.
the
and m e a s u r e s w h i c h s h o u l d t e n d
imports
covered i n t h e
cent
some a c c o u n t w a s t h e r e f o r e
trends as m o d i f i e d ,
g r o w t h of
per
g
by
.
home s a l e s b y B r i t i s h m a n u f a c t u r e r s .
of m a n u f a c t u r e s
indicated
£
to a ps.rticula.rly
two v e r y much l a r g e r
average
p e r annum c o m p a r e d w i t h 5 i p e r
cent
4
estimates
supplies
1 0
semi-manufactures,
and
0
subject
as f o r e i g n
7
c a s e of
industrial
hence a r e
9
just under
cent b e t w e e n
The
imports
period
in the
s l o w down s u b s t a n t i a l l y .
in
(which
eepected
constant
& S3 .-w
prices
as
c o m p a r e d w i t h 7-1 p e r
cent
per
annum b e t w e e n
1960 a n d
1964.
62.
Over t h e l a s t
decade imports
average r o s e
b y 2-g- p e r
recent past,
however,
cent
of f o o d ,
imports
in this
b e t w e e n 1960 and
1964 t h e
amounted t o
only about
cent
expected to
same r a t e
increase
as
in
that
the
1 per
continue,
are expected
sumption,
in imports
It
is
a t much t h e
r i s e of i m p o r t s
In the food,
is estimated
at
about
63.
of b s , s i c m a t e r i a l s
cast period,
however,
is expected
to r e v e r t
the f o r e c a s t
slowing
semi-manufactures
drink
cent
longer
annum a s c o m p a r e d w i t h
down i n
The r e s u l t i n g
for
annual i n c r e a s e
(at
65.
expected t h a t
thus
of i m p o r t s w i l l
rise
constant
gradual
Imports
that
annum b e t w e e n
1954/64 -
0,1
p e r annum.
rate
over
tobacco
con­
will
The
annual
1964 a n d
of b a s i c
total
Over t h e
fore­
g r o u p of
imports
longer run,
since
in imports
(see Table
of
4 per
forecast
a t m u c h t h e ramie r a t e
N
per
of
lead
materials.
1964 p r i c e s )
7.22
during
production will
imports
over the
the
fast
1970,
per cent
of i n c r e a s e
industrial
SECRET
a
anti­
as in the p a s t .
obtaining
to
of
of d r i n k
a l s o r o s e much l e s s
the
in
in tobacco
of r e c e n t
imports
the
continued
will result
of g r o w t h of t h i s
by i m p o r t s
figure
volume
T h i s more
food.
effect
per
cent
the r a t e
to t h a t
much
and t c b a a c o g r o u p s a s a whole
period
1.2 p e r
in r e l a t i o n
t o some s u b s t i t u t i o n
the
same r a t e
1 per
1960/64 t h a n o v e r t h e
is
of
expected
continue r i s i n g
It
p e r annum.
in
t o be h e l d b a c k by o n l y a m i n o r r i s e
smoking c a m p a i g n s .
640
annual r i s e
more
d e c a d e , c o u p l e d w i t h some
which in t u r n r e f l e c t s
Imports
category increased
of home p r o d u c e d f o o d ,
relatively moderate r i s e
In t h e
on
A p o p u l a t i o n g r o w t h a t much
over the past
output
and t o b a c c o
p e r annum i n v o l u m e .
less f a s t ;
trend i s
drink
3) i s
an
cent.
period the
as during
volume
1960/64,
despite the
faster
fact
rate.
that
output
The r e a s o n s
ship between the
individual
for
g r o w t h of
largely been discussed
is
i n 1964 a r e
output
and t h e
However,
in the i n i t i a l - y e a r
thought
grow a t
change
trend increase
of i m p o r t s
the a c t u a l
a further
compared w i t h 4 p e r
relation­
fa.otor
long-term
1964-
It
is
as
trend
follows
s
of
the
that
e x p e c t e d t o be
shown i n t h e
the
Imports
the
somewhat
- b e t w e e n 4-g- and. 5 p e r c e n t
cent
have
main
and t h e r a p i d i t y
1964-70 i s
increase
in the
dealing with the
year
1963 and
from
appreciably
of t h e P l a n p e r i o d .
in that
economy d u r i n g
an
g r o w t h of i m p o r t s
t o have been above t h e i r
upswing of t h e
higher than
implied
in the paragraphs
owing t o h e a v y s t o c k b u i l d i n g
annum a s
the
commodity groupie.
l e v e l of i m p o r t s
expected to
per
table.
TABLE 7 . 3
(£ m i l l i o n ,
1964
prices)
1970
1 964
Pood,
d r i n k and
Basic
materials
tobacco
Fuels
S em i - m a n u f a c t u r e s
Finished
manufactures
Per cent
p e r annum
1,758
1,878
1.0
1,119
1,210
1.3
585
790
5,1
1 ,325
1,830
5.5
899
1,480
8.7
Total
(c.i.f. )
5,686
7,180
4.0
Total
(f.o.b.
5,024
6,350
4.0
y i ) The b a l a n c e
66.
of v i s i b l e
The o v e r a l l b a l a n c e
the paragraphs
trade balance
above a t
that
b a s i s of p o s t - w a r
the p r i c e s
rise,
the
trade
of
1964 t e r m s of
experience,
and t h u s w i l l
i n 1970 h a s b e e n f o r e c a s t
1964 p r i c e s .
of m a n u f a c t u r e s
of t h e c o n t i n u i n g
payments
This would imply f o r
trade
however,
and incomes
7.23
SECRET^
that
continue
together with the
policy,
the
On t h e
seems v e r y l i k e l y
entering world trade w i l l
p r o v i d e some r o o m ,
prices
it
continue.
in
for United
to
impact
Kingdom
despite the fact
faster
rate.
that
output
The r e a s o n s
ship b e t w e e n t h e
for
the
in the
in 1954 a r e t h o u g h t
implied
an
appreciably­
change i n t h e
relation­
and t h e g r o w t h of i m p o r t s
i n t h e para.gra.phs d e a l i n g w i t h t h e
commodity g r o u p s .
l e v e l of i m p o r t s
e x p e c t e d t o grow a t
g r o w t h of o u t p u t
largely been discussed
individual
is
However,
initial
year
a further
of
in that
upswing of t h e
economy d u r i n g
trend i n c r e a s e
of i m p o r t s
year
1963 and
from
increase
annum a s c o m p a r e d w i t h
4- p e r
long-term
1964-
It
expected
a s shown i n t h e
the
Imports
trend,
of
the
follows, t h a t
t o be
- b e t w e e n 4el a n d 5 p e r
cent
is
and the r a p i d i t y
1964--70 i s
higher t h a n the a c t u a l
main
the Plan period.
t o have been above t h e i r
owing t o h e a v y s t o c k b u i l d i n g
factor
have
the
somewhat
cent
per
table.
-J-ABLE_._7_._3.
Imports,
1964-70
(£ m i l l i o n ,
Pood;,
Pood; , d r i n k a n d
Basic
1964
tobacco
materials
Finished
Per cent
p e r annum
1964
1970
1,753
1,878
1.0 1,119
1,210
1.3 585
790
5,1 1,325
1 ,830
5,5 1,480
8.7 Fuels
Semi-manufactures
prices)
manufactures
899
.
Total
(c.i.f.)
5,686
7,180
4.0
Total
(f.o.b.
5,024
6,350
4.0
V1
( -) I b e . J o a l a n c e
66,
jotwirlsiJhLe.Jbrade
The o v e r a l l b a l a n c e
the p a r a g r a p h s
above a t
trade balance that
b a s i s of p o s t - w a r
the p r i c e s
rise,
of t h e
the
of
1964 t e r m s
experience,
and t h u s w i l l
in
1964 p r i c e s .
of m a n u f a c t u r e s
continuing
payments
provide
prices
1970 h a s b e e n f o r e c a s t
This would imply f o r
of t r a d e
however,
it
entering world
some r o o m ,
and incomes
7.23
SECRET^
continue.
the
On t h e
seems v e r y l i k e l y
trade will
continue
t o g e t h e r -with t h e
policy,
in
for United
that
to
impact
Kingdom
exporters
to restore
Nonetheless
ject
forecasts
of
profit
to he v e r y c a u t i o u s
c r e d i t has been
improvement
in the terms
good r e a s o n s
prices,
the
for
and i m p o r t s
error,
of
believing
of
for
after
t r a d e would r e s u l t
deficit
Hence no
further
the
3 per
in
commodity
cent
in a further
t o a b o u t £80 m i l l i o n
unusually
1965/
the deficit
3 per
cent
were
of t h e U n i t e d Kingdom w e r e
cent,
The a s s u m e d
of
sub­
therefore
sharp r i s e s
cent
in
decrea.se
of
in
volume
trade
at
1964
1964 t o £ 2 6 0
improvement
(Table
a year
on v i s i b l e
p r i c e s w o u l d b e r e d u c e d f r o m C£553 m i l l i o n
i n 1970,
is
1964 (when t h e r e
e x p o r t s growing by 5 i p e r
by 4 p e r
sales,
inevitably
any
t r a d e beyond t h a t
that
trade
are
and i t
calculations
a n d / T h e m i d d l e of
With t o t a l
trade
taken place between
terms
unfavourable)
of
on o v e r s e a s
in making p r o j e c t i o n s .
taken in the
which had a l r e a d y
margins
the terms
t o a c o n s i d e r a b l e m a r g i n of
prudent
67,
their
in
million
our terms
the v i s i b l e
of
trade
7.4)
TABLE 7 . 4 .
V I S I B L E TRADE
(£ m i l l i o n ,
1964
prices)
i
1970
1964
Exports
and
re-exports
Imports
Balance
(at
1964
4471
+
6090
- 5024
-
6350
-
-
260
*
prices)
553
Balance (allowing for
improved t e r m s of t r a d e )
y i
( i)
6 ,
The o v e r a l l
balance
In Table 7.5
of t h e b a l a n c e
of
of
payments
the foregoing
payments
The a t t a i n m e n t
given the measures
in
1970
estimates
of
the various
i n 1970 a r e b r o u g h t
together with the balancing
in 1970,
80
item,
of t h i s
described
7.24
to a surplus
objective
above to
limit
together,
of
should
items
leading,
£250
million
be
possible,
government
overseas
spending and p r i v a t e
resources
and i n v e n t i v e n e s s
trade balance
to
prices
scarce
to tackle
and i n a wide v a r i e t y
productive
generally,
and
to release
i r o n defence work,
encourage
efficiency
productivity,
abroad,
i n d u s t r y by i n d u s t r y ,
p r a c t i c a l ways,
industrial
investment
and t o a c h i e v e
a/policy
-TABLE 7 . 5
C/JEHALL BALANCE OF PAYMENTS
1964
prices^)
1970
1964
Balance
of v i s i b l e
trade
Government e x p e n d i t u r e ,
and c a p i t a l ( n e t )
Private
invisibles
(net)
Private
long-term
capital
Balancing
-
553
-
80
-
551
-
520
*
610
-f 7 0 0
-
251
+ 100
invisibles
current/
(net)
item
-1-
Total
* B u t a l l o w i n g f o r
3 per
U n i t e d Kingdom t e r m s
7.25
cent
of
of
i n v e s t m e n t and i n c r e a
s u e ce s s f u l
incomes.
(£ m i l l i o n ,
the
1
50
250
744
improvement
trade.
4-
in
the
for
15.
1.
THE,,'USE..OF RESOURCES Table 1 5 . 1 sets out in broad terms the changing use of
resources between 196k and 1 9 7 0 .
A 25 per cent growth in output
would mean an increase in national product of rather more than
£8,000 million at 196k prices.
Of this, something approaching
£2,000 million will be required to correct the balance of
payments and to increase productive, investment in private and
nationalised industry.
Of the remainder only a small increase
has been included for defence expenditure.
2.
This leaves about £ 6 , 0 0 0 million to be divided between
additional personal consumption, private and public housing, and
other public civil expenditure on goods and services, on both
current and capital account.
In total this represents an
increase of about 23 per cent between 136k and 1970 for these
purposes.
Public civil expenditure is expected to increase by
28 per cent, housing by 32 per cent and personal consumption by
21 per cent.
3.
More details of the estimates are given in the following paragraphs. Balance of payments U.
The country's basic objective in this field must be to remove
the present overall deficit and. replace it with a surplus large
enough to repay the debt recently incurred.
achieving this are discussed in Chapter 7 .
The means of
A very substantial
contribution must come from the long-term capital account.
The
deficit here was abnormally high in 196I4. ( £ 3 7 0 million against a
past average of £150 million), and in addition the measures
announced in the Budget to limit private investment abroad will
more than offset the increase in aid to developing countries;
this will have to be much slower than in the past until the
15.1 The use of resources 196k to 1
14BLE
(
15*1
196k
1970 196L-1970
Increase £ million, 196k prices
Jross national product Balance of trade in goods and services and net investment income from abroad. 32,639
J+0,800
8,160
Total
percentage
increase
Average annual percentage increase 25 3.1
36 5.3
7.6
5
Investment Private and nationalised industries 500 -I65
3,861
1,385
5
Stockbuilding 525
Social and other public services 71+1
1,150
1+1C
55 1,209
1,595
385
32 Defence
1,921
2,01+0
120
6
1.0
Consumption Social and other public services 3,510
i+,1+80
970
28 1+.2
21,038
25,U25
U,385
21 3.2
Housing Personal 530
15.2 balance of payments has been restored to a sound position.
To the extent that the balance of payments is improved by this means there will be no additional claims on our resources. 5.
It also seems reasonable to take credit for a small
improvement in the terms of trade compared with 196k when world
prices of food and materials appear to have been abnormally high
in relation to the prices of manufactures.
Our terms of trade
are already 2 per cent better than in 196k as a whole and this
improvement seems likely to be maintained or increased.
6.
Taking all these factors into account, it is estimated that
an improvement of £500 million at constant prices in the balance
of trade in goods and services and net investment income from
abroad will be needed between 196k and 1 9 7 0 .
Taken in conjunction
with the expected changes in other items of the balar.ce of
payments, this should be sufficient to meet our objectives.
Investment
7.
Investment by private and nationalised industries is expected
to increase by about 35 per cent, substantially faster than the
national product.
8.
In the nationalised industries, despite large proportionate
increases programmed for the Post Office, gas and the docks, total
investment is forecast to go up comparatively slowly, and
considerably more slowly than in the past.
A major factor is a
levelling off in electricity investment after 1 9 6 6 .
For all
nationalised industries taken together the whole increase in
investment is expected to take place during the first two years
of the plan period.
9.
In private industry the estimates allow for an increase in
manufacturing more rapid than in the past, and higher figures than
suggested by the Industrial Inquiry.
Investment by the distributive
trades is expected to increase rather less rapidly than in the
past;
and investment by property companies and financial
15.3
SECRET
institutions is assumed to grow considerably more slowly as the
boom in office development comes to an end.
Details of the
expected changes in investment by private and nationalised
industries are given in Chapter 5 .
10.
Stockbuilding was unusually high in 196I4. and approximately
the same figure has been allowed for 1 9 7 0 despite the higher level
of output in that year;
this has been calculated on the basis of
past relationships between the growth of the national product and
stock movements.
Defence expenditure
11.
The C-overnment is planning on the basis of limiting defence
expenditure to the level of the Estimates for 1 9 6 k / 6 5 at constant
prices.
This represents a reduction of £ k 0 0 million compared with
the programme for 196C/70 when the present Government took office.
(Since the 1 9 6 k / 6 5 estimates were underspent there will be some
increase over the actual level of expenditure in 1 9 6 k . )
0ther public expenditure and housing
12.
To reach a programme of 5 0 0 , 0 0 0 houses in 1970 will involve
an average increase in expenditure of I4..8 per cent a year from
196b to 1 9 7 0 on investment in housing.
discussed in Chapter 1 9 . )
(The housing programme is
Investment in social and other public
services (roads, schools, hospitals, etc.) will rise by about
55 per cent between 1 9 6 k and 1 9 7 0 .
Current civil expenditure on
goods and services will rise by about 28 per cent.
Both these
increases are faster than that in the national product.
Public
service investment is expected to rise particularly rapidly in
the early years of the period.
Personal consumption
13.
Achievement of the 2 5 per cent growth target would make
possible an increase in personal consumption of about 21 per cent
between 1 9 6 k and 1 9 7 0 , an average of 3 . 2 per cent a year.
This
is slightly faster than the 3 . 0 per cent a year average increase
*
15.k
from i960 to 196k. In tennis of consumption per head the average increase
expected from 196k to 1970 is 2.4 per cent per annum as against
2.2 per cent from i 9 6 0 to 1 9 6 k .
But allowing for the changing age
distribution of the population there should he room for a more
marked acceleration in the standard of living of the average worker
and the average pensioner:
2 . 7 per cent from 196k to 1970 as
against 2 . 3 per cent from i 9 6 0 to 196U.
The reason for this is
that the proportion of retired people in the population will
increase more rapidly in the future than in the recent past and (even
afteraallowing for recent improvements in pensions) those who have
retired tend to have a lower consumption per head than those at
work.
Savings
1U.
The value of the resources required for fixed investment at
home, for the building up of stocks of finished goods, work in
progress and raw materials, and for net investment abroad must
be matched by domestic savings.
Savings are customarily
distinguished by the broad sector of the economy by which they
are made.
These sectors consist of persons (including non-profit­
making institutions), companies, the public corporations, the
central government and local authorities.
15.
The projection of the level of savings as a whole for several
years
ahead is inevitably subject to a high degree of uncertainty,
depending on the development of the various components of money
incomes and consequent price movements.
An examination has
nevertheless been made of the prospects for savings.
The
assumptions made include a significant allowance for the effect
of the Government's prices and incomes policy, a continued steady
rise in the proportion cf disposable income which the personal
sector devotes to saving, and the maintenance of the rates of
central government direct and indirect taxation made effective in
the 1965 Budget.
Although the last assumption is convenient for
15o5
v/orking purposes, in practice rates of taxation are varied both
generally in order to match the prospective demand for resources
with the resources likely to be available and specifically in the
furtherance of economic and social policy objectives.
The use for
the purposes of projection of present ( 1 9 6 5 Buclget) tax rates
implies that the proportion of personal income taken by direct
taxes would rise with general increases in money incomes, because
cf the progressive nature of the scales of income tax and surtax,
but that the ratio of indirect taxes to expenditure would fall.
16.
The result of the examination indicates that in 1 9 7 0 the
total of the savings by persons and companies and of the current
surplus of the public sector as a whole, implied by the assumptions
made, is likely to be broadly in line with investment requirements.
This tentative conclusion does not detract from the need to
encourage savings.
The more rapid the rise in the ratio of
savings to disposable income, the lower will be the taxation
required.
In other words, the greater the willingness of people
to forego voluntarily present consumption in the interests of
future developments, the easier will it be for the resources of
the country to be directed to speeding up the rate of growth.
Phasing
[17.
The phasing of the growth of national output and the various
forms of expenditure discussed above in the period to 1 9 7 0 raise
questions essential to the achievement of the plan.
The most
critical ones are the development of the balance of payments,
the course of productive investment in private industry and the
speed with which productivity and productive capacity can be
increased.
18.
All these factors point to a faster growth of output in the latter part of the period than in the earlier years.
The
allocation of resources in the first part of the period will reflect the fact that the major part of the improvement in the 15.6
SECRET
*
Z0
-3
balance of payments will have to be achieved in the first two years or so (part of the necessary diversion of resources for this purpose has already taken place). 19.
The phasing of private manufacturing investment is uncertain,
The Plan provides for an average increase cf about 7 per cent
a year from 1 9 6 k to 1 9 7 0 .
It seems quite probable that the
increase in manufacturing investment from 1 9 6 k to 1 9 6 5 may exceed
this.
The outlook for 1 9 6 6 , however
P
is more uncertain.
The
very sharp growth probable between 1 9 6 k and 1 9 6 5 is unlikely to
be repeated; and it is doubtful whether the engineering industries
could bear such a load, given the need for increased exports,
import replacement and the investment plans of the nationalised
industries.
To the extent that the growth in investment in
manufacturing is relatively slow in the next year or two, a more
rapid rate of expansion will be needed in the later years of the
period to ensure the planned rates of output in 1 9 7 0 .
21.
The rate of increase expected or planned in other claims on
resources will mean that personal consumption will increase rather
more slowly than the gross domestic product over the period 2.36k
to 1 9 7 0 .
Over the whole period the average increase is estimated
at 3.2 per cent a year in total;
but the rate of increase is
likely to be slower than this in the early years and faster
in the latter part of the period.
In the latter part of the plan
period the achievement of a more rapid growth of output than in the
past should be correspondingly reflected in a more rapid growth
in personal consumption.
15.7
SECRET
18,
PUBLIC -EXPENDITURE
Public expenditure, as discussed in this chapter, includes all central and local government capital and current expenditure, with the exception of debt interest, and includes the gross outgoings of the national insurance funds.
The capital investment programmes of the nationalised industries and other public corporations are treated separately, since they raise rather different issues;
and
for the purposes of this chapter, Exchequer advances to these industries are not included, in "public expenditure":
the investment programmes of these industries are set out in Chapter. 2.
Public expenditure so defined is estimated at over £ 1 1 , 5 0 0
"illion in 1 9 6 5 - 6 6 , and accounts for about [ 3 8 per cent] of the
use of the total gross national product.
It represents a wide
variety of kinds of expenditure, including defence and other
expenditures in support of the Governments external policy;
public services such as education, health, police;
of roads, houses, public buildings;
benefits and national assistance;
the
the provision
the national insurance
support for agriculture, railways,
industry in the development districts, etc.
Their size is deter­
mined by decisions by the Government or by local authorities (or
by both working together);
and they are paid for by central
taxes, local rates, national insurance contributions, or borrowing
by Government or local authorities from the public.
3.
The Government decided in November 196k to review the whole
field of public expenditure.
After a first examination of the
prospects, they decided that the rise in public expenditure (as
here defined) should in the period from 1 9 6 k - 6 5 to 1 9 6 9 - 7 0 be
limited to an average of UTT per cent a year at constant prices.
This was announced by the Government in February, and has later
been reaffirmed.
The review has been completed.
The Government
have decided on individual programmes which in the aggregate are
within this overall limit.
For financial control purposes the
expenditure limit has been determined for 1 9 6 9 - 7 0 .
18.1
These figures
have, however, "been converted to give the expected expenditure in
1970 for use in other parts of this document.
Ij.,
This method of review thus involved, first, a decision about
how much resources can be set aside for public expenditure
(compatible with leaving an adequate amount for the strengthening
oi" the balance of payments, private investment and private con­
sumption);
and, second, a series of decisions allocating this
total between the various elements of public expenditure.
To have
decided first how much public expenditure the country could afford
and then how to lay this out to the best advantage may be regarded
as a new departure in public finance.
5.
In allocating the prospective resources in this way, five years
5
ahead, the Government s main aim was to strike a reasonable balance
between the essential but non-productive needs of defence and the
support of external policy;
the provision of services such as
roads and ports, support for industry and advanced technology, and
the improvement of regional balance, all of which contribute
directly to economic growth;
and the extensive and. growing network
of social services, which are not only an essential part of most
people's total standard of living, but may also play an important
indirect role (e.g. through improving education and health) in
helping economic growth.
6.
Looking even as far ahead as 1 9 6 9 - 7 0 , the Government's room
for manoeuvre is limited.
The development of the great public
services of defence, education, health, roads, etc. is necessarily
planned several years ahead;
for this is the time required to
train skilled, staffs and to plan and build new capital facilities.
Moreover, the reorganisation of defence must move in step with the
development of foreign policy on the one hand, and the advance of
defence technology on the other.
The 12-g- per cent increase in
the number of school children requires substantial additional
expenditure and thus limits the extent to which standards can be
improved.
A place must be found in the programmes for expenditures
18.2
which are directly beneficial to the national economy;
and clearly the Government have to take into account the impacts of various programmes, both favourable and adverse, on the balance of pay­
ments. 7.
Nevertheless, the Government have been able to carry out a
considerable reshaping of the public expenditure programmes, and
the decisions which have been taken for the period from I96I+-65 to
1969-70 are set out in Table 18.1.
18.3 SECRET
PUBLIC EXPENDITURE BY FUNCTION TABLE 18.1 (£ million at 1965 prices)
1965/66
1969/70
! 2,073
2,13k
2,075
k06
k26
575
571
691
16k
257
196k/65
Defence Budget
Roads
Public Housing
519
capital expenditure
Housing subsidies etc.
153
j
237
230
police and Prisons
Education (with school
meals and milk)
l h59
Health and Welfare
(with welfare foods)
j 1,238
Benefits and Assistance !
(with family allowances)! 2,120
281
1,574
f
1,316
Total, main programmes; 8 , 1 9 8
8,801
10,251
2,602
2,775
2,944
Other programmes
100
Contingency allowance
Aggregate^-'
10,800 ( 2 )
11,576 (3)
13,295
( 'This aggregate is of public expenditure as defined in
paragraph 1 above and in Table [ k 3 ] in the Blue Book
National Income and Expenditure 1965*
This is the total
which the Government decided to contain within an average
of k4 per cent a year at constant prices in the period
1 9 6 k / 6 5 to 1 9 6 9 / 7 0 .
(^These are estimates for I 9 6 U / 6 5 , made for the Government's
first analysis from which the
per cent" decision was
taken, adjusted to 1965 prices.
The outturn was somewhat
lowero
( 3 k
Estimates of summer 1 9 6 5 at prices related to the Budget
Estimates of 1 9 6 5 / 6 6 etc.
These prices are used for the
1969/70 figures also.
5
18. k 3,
Defence fcudRet. The Governments review of defence expendi­
ture is intended to limit expenditure in 1 . 6 . - 7 0
to £ 2 , 0 0 0 million
at 1 9 6 L prices, i ,e, to the same level as the 1 9 6 U - 6 5 Estimates.
The previous estimate for that period was around £ 2 , h 0 0 million at
196k prices.
The Government have announced decisions on aircraft
procurement and the future of the Army Reserves which will go a
considerable way towards this objective:
the review continues, and
further decisions will be announced in the coming months.
The
time-lag between defence decisions and expenditure is such that
the 1 9 6 6 - 6 7 Estimates will be higher, even at constant prices, than
those for 1 9 6 5 - 6 6 ;
and the reduction to the new level will not
begin to appear until the later years of the period.
9'
Roads.
The programme is a continuation of the five-year
programmes carried out by the ministry of Transport and the
Scottish Development Department together with the local authorities.
It represents an increase of hl-g- per cent from I96I1.-65 to 1 9 6 9 - 7 0 ,
[Chapter
10o
],
Housing.
The capital expenditure figures, which provide an
increase of 33 pe^ cent from I96I4.-65 to 1 9 6 9 - 7 0 ,
are those of
local authorities and new town corporations etc. in Great Britain,
representing their component of the National Housing Plan aimed at
a United Kingdom total of 5 0 0 , 0 0 0 houses in 1 9 7 0 .
11,
[Chapter 1 7 ] .
The total cost of housing subsidies (central government and
local authority subsidies, plus improvement grants) will in any
case increase fast over the period, with the speed-up of public
sector housing which has already taken place and which will be
intensified in the latter part of the period.
Provision is also
made for improved subsidies for local authority building, which
the Minister of Housing and Local Government and the Secretary of
State for Scotland intend to announce in October;
and some
provision is made in 1 9 6 9 - 7 0 for assistance to owner-occupiers.
The total housing subsidy bill shews an increase of 6k per cent
from 136I1-65 to 1 9 6 9 - 7 0 ,
18.5
12.
Police and prisons.
The estimates show an expansion of the
cost of these services of 22 per cent in the five-year period.
13.
Education.
This programme covers all education, primary,
secondary, further and higher, and represents an increase of
32 per cent in the five-year period.
This is partly related to
increased numbers, i.e, provision of teachers, school buildings
and equipment to match the expected increase of about 12-g- per cent
from 1 9 6 k to 1 9 7 0 in the number of school-children (Great Britain);
an estimated increase of around 33% in further education enrolments;
and an increase cf about 30 per cent in the number of university
students from 1 9 6 k to 1 9 7 0 .
It is related also to improved
standards in all kinds of education.
on education has increased from
In the aggregate, expenditure
per cent of the gross national
product to
per cent in the last decade, and will on this basis
increase to
per cent by 1 9 7 0 .
14"
He a 1 th an d v/elf are .
[Chapter 21].
The programme covers the whole of the
Rational Health Service, and certain related expenditures (e.g.
welfare milk), and represents an increase of 23^per cent in the
five-year period.
The main elements are the continuing develop­
ment of the hospital service, both the new hospitals and. the
improvement of services within the hospitals;
conditions of GP's;
health services.
15.
the improvement of
and a very rapid growth of local authority
[Chapter 2 0 ] .
Benefits and assistance.
This is the largest of the pro­
grammes, covering the national insurance benefits together with
industrial injury benefits, war pensions, family allowances,
national assistance.
The 1 9 6 9 - 7 0 figure shows an increase over
that for 1 9 6 h - 6 5 of £800 million or 38 per cent.
This represents
the sums required to carry out the objective of providing benefits
improving at the same rate as the national standard of living for
a steadily increasing number- of old people,
16.
Other Programmes.
[Chapter 2 2 ] .
The programmes described in the previous paragraphs represent about 80 per cent of total public expenditure. 18.6
The remainder include a wide variety of activities - support for agriculture, industry, the railways, advanced technology, scientific research, etc.;
a wide range of local authority current and capital expenditures, many of which will probably have to be slowed down to make room for the high-priority services; costs of public administration in Whitehall, in the town halls and Provision is of course also made for Northern overseas;
etc.
Ireland.
Overseas Aid is expected to go up at about the same rate as the expansion of the Gross National Product, but the exact level will depend upon progress with the balance of payments. 17'
An allowance of £150 million is left Contingency allowance.
for contingencies in 1969-70.
This allowance is necessary partly because of unpredictable changes of circumstances, and partly because of a tendency to uncler-estimate the future cost of providing for any particular defence or industrial or social policy. 18.
The Government have established Implementation of programmes.
for each main programme limits of expenditure for 1969-70 after talcing into account the expected implications of these limits on the development of each service.
These limits now provide a measure of the amount of resources within which each Department can plan its programme.
The developments of each service given in the accompanying chapters represent the programmes that are believed at present to be practicable within the limits of the resources set aside for them, 19. These programmes must be flexible.
The allocations for 1969-70 are designed as a basis for realistic planning, but they assume a successful development of the whole of the economy on the lines indicated in this Plan.
The progress of the individual programmes depends upon, for example, the supply of manpower tanging from the most highly qualified specialist to the unskilled worker:
all depends upon the success of the construction industry in achieving a continuing increase of productivity and growth of output. 18.7 SECRET
20.
It follows therefore that these programmes, individually and
in the aggregate, must he subject to continuous modification in
the light of the development of the economy.
In a year's time,
these allocations will be reviewed, and limits established for
1970-71o
Thus, the course of the main public services will be
regularly adapted to changing needs and to tho ability of the
national economy to satisfy them.
18.8 Public expenditure analysed by; economic category and main functions 18.2 T A B l i J i
(£ million at 1 9 5 5 survey prices)
-
1965/66
1964/65
1969/70
196k
1965 survey survey estimates n^ent expenditure on goods and services:
[Defence budget(2)
Roads
police and prisons
Education (with school meals and milk)
Health and welfare (with welfare
foods) Benefits and assistance (with family allowances) ; Other-
Total estimates 2,037 19k 205 936 2,095 1,092
1,157
92 1,179 1,158 105 1,449 5,735
5,906
6,575
201 213 988 94 2,035 211 249 1,20k 1,322
(3) p i t a l formation)^
[Deforce budget^ ' 1 Roads Housing Police and prisons
1 Education (with school meals and milk)
; Health and welfare (with welfare
:
33 146 225 571 24 159 33 36k 691 32 235 100 436 112 548 157 674 c
25 j foods)m
:
30 211 51 )
OtnerTotal
''' v
bbsidies:
\ Housing Other Total 1,672
1,467
;
135 445
lkk 580 preht grants to private sector:
Education (with school meals and milk):
Universities and other educational
"bodies
129 Persons
160 ; Benefits and assistance (with family
allowances)
' 2,017 Other
:
179
Total jurrent grants and loans abroad:
; Defence budget(2)
Overseas aid
Other
Total 2,485
2,186
421 231 341 565 572 145 190 216 182 2,270 187 2,801 2,784
3,442
235 181 69 5
196 77 5
228 47 254 278 280 4
-UBLE 1 8 , 2
(£ m i l l i o n a t
(Ctd)
1969/70
1965
survey
estimates
19
26
88
100
77
76
98
134
118
80
54
280
371
240
2,073
181
406
673
230
2,134
196
426
735
237
2,075
228
575
948
281
1 ,459
1 ,574
1,923
1 ,238
1,316
1,529
2,120
2,421
2,379
2,579
2,920
2,816
10,801
11,576
13,295
Total
afence b u d g e t
v
1
rerseas a i d
Dads
)using
dice- and p r i s o n s
ideation ( w i t h s c h o o l m e a l s
prices)
1965/66
1965
survey
estimates
1964/65
1964
survey
estimates
:ital g r a n t s and l o a n s t o p r i v a t e
ictors
Housing i m p r o v e m e n t g r a n t s
Education ( w i t h s c h o o l m e a l s and
milk) :
U n i v e r s i t i e s and o t h e r e d u c a t ­
ional bodies
Other t
Net l e n d i n g f o r h o u s e p u r c h a s e
Other
1965 s u r v e y
and
:ilk)
ialtii and w e l f a r e ( w i t h w e l f a r e
foods)
m e f i t s and a s s i s t a n c e ( w i t h
family a l l o w a n c e s )
Other
Total
) The e x p e n d i t u r e s h o w n f o r e a c h f u n c t i o n i s t h a t o f G r e a t B r i t a i n ^
spending a u t h o r i t i e s .
The e x p e n d i t u r e o f N o r t h e r n I r e l a n d s p e n d i n g
a u t h o r i t i e s i s i n c l u d e d i n t h e t o t a l f o r each economic c a t e g o r y and
in " o t h e r " .
Ws
does n o t i n c l u d e a l l e x p e n d i t u r e on m i l i t a r y
i n t a b l e 48 o f t h e N a t i o n a l I n c o m e B l u e B o o k .
jj
Gross f i x e d
capital
Includes i n c r e a s e
negative i t e m .
formation
in value
and i n c r e a s e
of s t o c k s ,
defence
in value
and s a l e s
of
as
defined
stocks.
of a s s e t s
as
a
' l h e t o t a l s shown f o r e a c h m a i n f u n c t i o n may e x c e e d s l i g h t l y t h e sum
of t h e f i g u r e s d i s t i n g u i s h e d i n e a c h e c o n o m i c c a t e g o r y f o r t h a t
function.
Where t h e a m o u n t of e x p e n d i t u r e o n o n e o f t h e s e f u n c t i o n s
within a p a r t i c u l a r economic c a t e g o r y i s s m a l l , i t h a s n o t b e e n
distinguished s e p a r a t e l y but included i n the heading "other" for t h a t
economic c a t e g o r y .